Private Company Council-pg 171-173

Question 1

Five Factors that differentiate needs of Public/Private Companies

Answer 1

1. # primary users and access to mgmt
2. Investment strategies of primary users
3. Ownership & Cap Structure
4. Acct resources available to generate reporting/disclosure info
5. Resources available for learning about new financial reporting guidance on timely basis

Question 2

Where guidance might differ for Public/Private

Answer 2

1. Recognition & Measurement
2. Disclosures
3. Display/presentation
4. Effective Date
5. Transition Method

Question 3

Public Company Defined

Answer 3

1. Required by SEC to file/furnish FS
2. Required by Securities Act of 1934 to file/furnish FS w/ regulator agency other than SEC
3. Required file or furnish FS w/ foreign or domestic reg agencies in order to sell/issue securities
4. Has issued securities that are traded/listed/quoted on exchange or over-the-counter market
5. Has securities not subject ot contractual restriction and is required by law/contract/regulation to prepare US GAAP FS and make them publicly available

Question 4

Acct of Goodwill

Answer 4

1. Private can amortize GW on straight-line basis over 10 yrs or less than 10 yrs-entity doesn’t have to complete annual impairment testing
2. Must complete impairment testing when triggering event occurs just as Public entity would test

Question 5

Testing for Interest Rate Swaps

Answer 5

1. Both variable rate on swap and borrowing based on same index & reset period
2. Terms of swap are typical and no floor or cap on variable interest rate (unless borrowing has comparable floor/cap
3. Repricing & settlement dates for swap & borrowing match or differ by no more than few days
4. Swap’s fair value at inception is at or near 0
5. Notional amt of swap matches principal amt of borrowing-amt of borrowing being hedged may be less than total principle amt of borrow
6. All interest pmts occurring on borrowing during term of swap designated as hedged whether in total or proportion to principal amt of borrowing being hedged

Question 6

If criteria are met for Interest Rate Swaps…

Answer 6

Private company can use practical expedient of settlement value to measure value of swap (excludes adj for performance risk) instead of fair market value–however, must provide complete doc & disclosure requirements related to cash flow hedge acct & fair value