Private Company Purpose

Question 1

What areas are different compare private to public companies?

Answer 1

Recognition and measurement
Disclosures and Presentation
Effective date and tradition method

Question 2

Differences of private actg treatment

1. For goodwill
2. Actg for interest rate swaps
3. VIE
4. Actg for intangible assets in business combination

Answer 2

1. Amortized at SL over 10 year, does conduct public company impairment test
2. Only for cash flow hedge, assume hedge is 100% effective to reduce testing for effectiveness
3. Not required to determine VIE in lease agreement such ad lease and lessor are under common control; has leasing agreement; all the activities are related to the lease; lessee guaranteed the lease obligation to lessor; no disclosure about the VIE. But include lease agreement
4. Can elect not to recognize certain intangibles, but have to recognize all intangibles that are separable, and arise from contractual or legal rights

Question 3

What organization approved private company council (PCC) that set private company standards?

What are the responsibilities?

Answer 3

Financial accounting foundation (FAF)

Responsibilities

Work with FASB to aid private company stds setting
Evaluate how FASB new stds would affect private companies
Consider relevance and cost for private company