Private company alternatives to become more accessible

By Ken Tysiac

Private company financial reporting alternatives will become more accessible under a Private Company Council (PCC) decision endorsed by FASB in December.

FASB endorsed the PCC’s consensus to remove the effective dates from four GAAP alternatives that were developed by the PCC. This paved the way for the drafting of an Accounting Standards Update (ASU) for vote by written ballot that would formally remove the effective dates.

Removing the effective dates would allow private companies to forgo an initial preferability assessment that otherwise would have been required under Topic 250, Accounting Changes and Error Corrections, when the alternatives were initially elected.

Effective dates will be removed from:

  • ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill.
  • 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. 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements.
  • ASU No. 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination.

FASB also endorsed the PCC’s decisions to indefinitely extend the transition guidance of the four ASUs and to require private companies electing one or more of the alternatives to make the change using the original transition provisions included in those ASUs for the first year applied.

Under this guidance, the accounting alternatives within ASU No. 2014-02, ASU No. 2014-03, and ASU No. 2014-07 must be applied as of the beginning of the first annual reporting period in which each alternative is elected. The accounting alternative within ASU No. 2014-08 must be applied as of the first in-scope transaction in the annual reporting period in which the alternative is elected.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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