FASB endorses private accounting rules

The Financial Accounting Standard’s Board (FASB) endorsed three proposed alternatives within US Generally Accepted Accounting Principles (GAAP) for private sector entities. 

The alternatives, put forth by the Private Company Council (PCC), are designed to consider the financial reporting needs of entities in the private sector. The proposals involve accounting for intangible assets acquired in business combinations, goodwill, and certain types of interest rate swaps.

FASB will now issue the three proposals as exposure drafts for public comment later this month before any formal adoption of the proposals.

The PCC’s proposals will give private companies:

• Relief from separately recognizing certain intangible assets acquired in a business combination.

• Allow for the amortization of goodwill and a simplified goodwill impairment model.  

• Permit 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 decision to endorse the three PCC proposals represents “significant progress in our joint efforts to address concerns about the complexity and relevance of certain standards for private companies that prepare GAAP-based financial statements,” said in a statement FASB chairman Leslie Seidman. 

The PCC was established by the Financial Accounting Foundation (FAF) Board of Trustees to work with the FASB to determine alternatives within US GAAP for private companies.