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Private Company Accounting Changes Spark Debate Over Simplification

Tammy Whitehouse | December 3, 2013

The move to create exceptions to accounting rules for private companies is sparking a debate over simplification, with purists on one side fretting over a dual set of rules, and others pushing for more simplification for public companies too.

The Financial Accounting Standards Board wrote a new chapter in accounting history recently when it approved two changes to Generally Accepted Accounting Standards to provide private companies with exceptions to existing accounting rules related to goodwill and hedging.

The changes, recommended by FASB's new Private Company Council, allow private companies to bypass complex hedge accounting for certain interest rate swaps and to write down goodwill in equal amounts over 10 years in place of complex testing and measurement of goodwill impairment. If testing becomes necessary, private companies will be allowed to apply a much simpler equation to determine whether the writedown should be adjusted.

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