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CFO: FASB Issues New Private Company Accounting Alternatives

Date: Jan 21, 2014 @ 07:12 AM
Filed Under: Industry News

CFO reports private companies that adhere to U.S. generally accepted accounting principles (GAAP) will soon have more options when it comes to accounting for goodwill and for interest rate swaps. On Thursday Jan. 16, the Financial Accounting Standards Board issued two updates to GAAP. Any private company that doesn’t qualify as “public business entity” under FASB’s Private Company Decision-Making Framework can choose to either adopt the alternatives or stick with the existing standards.

The goodwill alternative will allow private companies that adhere to GAAP to amortize goodwill on a straight-line basis over 10 years or less. They will no longer have to do annual impairment tests, which can be onerous and costly. Instead, they would only perform an impairment test in the case of a triggering event, like a substantial decline in operating results or the loss of a key employee. The new standard also removes a costly second step from the impairment test and allows companies that adopt the alternative to do the test at an entity-wide level, rather than a reporting unit level.

To view the entire story on CFO.com, click here.

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