Private Company Reporting

Established by the Financial Accounting Standards Board (FASB) in 2013, the Private Company Council has developed a decision-making framework to determine when alternative recognition, measurement, disclosure, display, effective date or transition guidance for private companies reporting within U.S. generally accepted accounting principles was warranted. FASB also issued an Accounting Standards Update (ASU) to define what constitutes a public business entity (PBE). The new PBE definition is broader than previous criteria, so more companies will be considered a PBE.

FASB has issued four accounting alternatives intended to reduce the cost and complexity of financial reporting for private companies. FASB subsequently removed the effective dates of those standards, so companies are no longer required to first assess preferability when adopting an available alternative. These standards are summarized in the table below.

Accounting Standards Update

Summary

ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350):  Accounting for Goodwill

Allows a private company to amortize goodwill on a straight-line basis for a period of 10 years, or less if the company demonstrates that another useful life is more appropriate. Goodwill only would be tested for impairment when a triggering event occurs, applying a simplified one-step model. Read more

ASU No. 2014-03, Derivatives and Hedging (Topic 815):  Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach

Provides private companies—other than financial institutions—the option to use a simplified hedge accounting approach to account for certain fixed versus float interest rate swaps. Read more

ASU No. 2014-07, Consolidation (Topic 810):  Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements

Allows a private company to elect—when certain conditions exist—not to apply variable interest entity guidance to a lessor under common control. Read more

ASU No. 2014-18, Business Combinations (Topic 805):  Accounting for Identifiable Intangible Assets in a Business Combination

Allows a private company to simplify its accounting by recognizing fewer intangible assets in a business combination. Read more

ASU No. 2016-03, Intangibles—Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810), Derivatives and Hedging (Topic 815):  Effective Date and Transition Guidance

Allows a company to adopt a private company accounting alternative at any time in the future, e.g., upon a change in circumstances or management’s strategic plan or when learning about the accounting alternative at a later date, without having to justify preferability. Read more

Jerry Henderson

National Industry Partner
Manufacturing & Distribution
502.581.0435

Donald Hutson Jr

National Industry Partner
Financial Services
314.231.5544

Tondeé Lutterman

National Industry Partner
Not-for-Profit & Government
816.221.6300

Eddie Marmouget

National Industry Partner
Health Care
417.865.8701

Tim Wilson

National Industry Partner
Construction & Real Estate
816.221.6300
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