Special-Purpose Frameworks

Question 1

What modification is allowed for private companies related to accounting for goodwill?

Answer 1

The goodwill can be amortized over a period not to exceed 10 years.

Question 2

What is a private company?

Answer 2

A private company is one that is not a public company. The Private Company Council (PCC) provides a definition of a public company as one that is required to file or furnish financial statements with a regulatory agency related to any type of securities (debt and equity), whether those securities are traded on exchanges or over the counter.

Question 3

What modification is allowed for private companies related to accounting for interest rate swaps?

Answer 3

The hedge accounting for a receive variable/pay fixed interest rate swap is simplified. The private company can assume 100% effectiveness and can use settlement value as a practical expedient for fair value.

Question 4

What does the Private Company Council (PCC) do?

Answer 4

It works with FASB to set accounting standards for private companies.

Question 5

Describe a modified cash basis of accounting

Answer 5

A modified cash basis of accounting results from adjustments made to cash basis accounting. Specifically, while most items continue to be accounted for using the cash basis, some items are accounted for using the accrual basis. As a consequence, the financial statements reflect accounts and amounts based on a combination of the cash basis and the accrual basis.