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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


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. 

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. 

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.

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. 

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. 

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