FASB proposes GAAP changes for private companies on 3 issues

BY KEN TYSIAC
July 2, 2013

FASB on Monday formally proposed changes to GAAP for private companies that are designed to make financial reporting less burdensome for private companies on three issues.

The proposals were crafted by the Private Company Council (PCC), which was created last year to propose alternatives for private companies within U.S. GAAP. They include:

  • A proposal that would relieve private companies from having to separately recognize certain intangible assets acquired in a business combination. The proposal was derived from PCC Issue No. 13-01A, Accounting for Identifiable Intangible Assets in a Business Combination.
  • A proposal that would permit amortization of goodwill (the residual asset recognized in a business combination after recognizing all other identifiable assets acquired and liabilities assumed) and a simplified goodwill impairment model. The proposal was derived from PCC Issue No. 13-01B, Accounting for Goodwill Subsequent to a Business Combination.
  • A proposal that would give private companies other than financial institutions the option to use two simpler approaches to accounting for certain types of interest rate swaps. The approaches could be used to account for certain types of swaps that are entered into by a private company for the purpose of economically converting its variable-rate borrowing to fixed-rate borrowing. The proposal is derived from PCC Issue No. 13-03, Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps.


Comments will be accepted through Aug. 23 at FASB’s website. The PCC and FASB will discuss the comments at the PCC meeting scheduled for Sept. 30 and Oct. 1. After that discussion, the PCC will consider changes to the proposals and take a final vote before submitting to FASB for a final decision on endorsement. Effective dates will be determined after FASB and the PCC consider feedback on the exposure drafts.

FASB’s staff also will conduct research and analysis during the comment period to determine whether the proposals should be extended to public companies or not-for-profit organizations; FASB will discuss that topic at a future board meeting.

“These proposals are intended to continue to provide users of private company financial statements with decision-useful information, while reducing the costs and complexity for preparers,” FASB Chairman Russell Golden said in a statement.

FASB voted in a June 10 meeting to issue the proposals.

The AICPA released a statement in response to the proposals, encouraging stakeholders to comment on the EDs and complimenting the PCC and chairman Billy Atkinson for their leadership and commitment to proceeding in an expeditious manner. The AICPA Financial Reporting Executive Committee and Private Companies Practice Section Technical Issues Committee plan to review the proposals and offer comments.

“Knowing that choice for private businesses is critical in this era of financial reporting, the AICPA welcomes the progress the Financial Accounting Foundation, FASB, and PCC have made in their efforts to improve the relevance of GAAP as it relates to private companies,” the AICPA statement said. “By issuing these exposure drafts, the PCC has taken an important step in proposing alternative accounting within GAAP regarding intangible assets acquired in business combinations, goodwill, and certain types of interest rate swaps—all of which are highly relevant topics to private companies.”

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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