PCC Votes to Finalize Interest Rate Swap and Goodwill Proposals

On October 1, 2013, The Private Company Council (PCC), which was established to ease the accounting for private companies, has voted to finalize the accounting for interest rate swaps as well as the accounting for goodwill that resulted from a business combination for private companies.

The interest rate swap proposal by the PCC would allow private companies, other than financial institutions, the option to use a simplified hedge accounting approach. This will allow private companies to account for their interest rate swap and the loan associated with the swap as a separate financial instrument. Additionally private companies in which the swap is the only derivatives would be exempt from certain fair value disclosures.

The goodwill proposal would give a private company that is purchasing another private company an option to amortize goodwill over a period of 10 years or less. Additionally, the proposal will simplify the impairment model for goodwill. This will allow companies to test for impairment only when there is a triggering even.

Before the finalized PCC proposals can be incorporated into U.S. GAAP, the Financial Accounting Standard Board (“FASB”) will need to endorse the PCC proposals since the PCC is an advisory body of the FASB.

We will keep you posted on these developments.

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