The Private Company Council (PCC) made progress toward creating its first GAAP exceptions and modifications for private companies.
PCC members voted to issue an exposure draft seeking public comment on proposed alternatives to GAAP designed to improve financial reporting for private companies. A simple majority of FASB members must endorse the ED before the proposal is issued for public comment.
The PCC tentatively decided to:
- Relieve private companies from separately recognizing certain intangible assets acquired in a business combination.
- Allow private companies to amortize goodwill and use a simplified goodwill impairment model.
- Allow two simpler approaches to accounting for certain types of interest rate swaps when a private company intends to economically convert the interest rate on its debt.
“The PCC took action on issues of critical importance to private companies, representing an important milestone in our joint efforts with the FASB to improve financial reporting in the areas of intangible assets, goodwill, and interest rate swaps,” PCC Chairman Billy Atkinson said in a news release. “The robust discussion and collaboration between the PCC and the FASB made this first step toward improvement possible.”
Formed last year by the Financial Accounting Foundation, FASB’s parent organization, the PCC has been charged with voting on GAAP exceptions for private companies.
Following the public comment period, the PCC will redeliberate the proposed exceptions and modifications and forward them to FASB. If FASB gives its final endorsement, the alternatives for private companies will be incorporated into GAAP.