TPAs address new private company accounting alternatives

BY KEN TYSIAC

Three new AICPA Technical Questions and Answers (TPAs) provide nonauthoritative guidance regarding application of some accounting alternatives FASB issued in January for private entities that are not classified as public business entities, as defined in Accounting Standards Update (ASU) No. 2013-12.

AICPA Technical Questions and Answers (TPAs) 9150.32–.33 and 9160.29 also provide nonauthoritative guidance on how application might affect a compilation, review, or audit engagement and related reports.

The accounting alternatives are included in FASB ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, and ASU No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach.

ASU No. 2014-02 permits a private company to subsequently amortize goodwill on a straight-line basis over 10 years, or less if the company demonstrates that another useful life is more appropriate. The alternative also permits a private company to apply a simplified impairment model to goodwill.

ASU No. 2014-03 gives private companies except for financial institutions an option to use a simplified hedge accounting approach to account for interest rate swaps that are entered into for the purpose of economically converting variable-rate interest payments to fixed-rate payments.

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