For Business Valuations Accounting Standards Codification (ASC) Topic 842: Leases is the lease accounting standard published by the Financial Accounting Standards Board, which replaces prior guidance from ASC Topic 840. ASC 842 brings previously off-balance sheet operating leases onto a company’s balance sheet. The new standard takes effect for private companies in fiscal years starting after December 15, 2021, and represents a fundamental change to financial statements, which are the foundation of business valuation analyses. This article will focus on potential impacts to a valuation analysis because of the change in accounting standards. Accounting Standards Codification (ASC) Topic 842: Leases…
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Private companies are subject to several frameworks for financial reporting purposes. In this article, Mark Zyla explains the role of the Private Company Council (PCC) and provides a summary of several recommendations the PCC has made to the FASB regarding accounting for goodwill and business combinations.
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Private Companies and Nonpublic Not-for-Profits are Exempted from a Particular Fair Value Disclosure as a Result of Recent FASB Amendment The Financial Accounting Standards Board responded quickly to concerns voiced in December to issue an amendment clarifying that private companies and nonpublic not-for-profits are exempted from a particular fair value disclosure. Ken Tysiac at The Journal of Accountancy reports the news:
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Consider Three Types of Private Preferred Stock Transactions, Each with Varying Degrees of Relevance to an Indication of Fair Value: Simple, Strategic, and Tranched Preferred Financing Last year, the AICPA issued guidance on evaluating private transactions with regards to their relevance in estimating the Fair Value of other securities within an enterprise via the back-solve method. The McLean Valuation Services Group recaps that guidance and explains what it should mean in practice. Appraisers need to carefully follow specific criteria and they need to exercise reasonable judgment.
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Some Stakeholders Suggest Improvements to Segment Reporting Information A 1996 accounting standard established to improve the way public companies report financial information about their business segments generally achieves that purpose, although some stakeholders suggest improvements. That was the overall conclusion of the post-implementation review (PIR) of Financial Accounting Standards Board (FASB) Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (codified in Accounting Standards Codification Topic 280, Segment Reporting). The PIR process was established by the Financial Accounting Foundation (FAF) in 2010. The Financial Accounting Foundation elaborates:
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Implications of the SEC IFRS Work Plan for Private and Public Issuers; How Slow Adoption May Rewrite GAAP Grant Thornton Audit Services has published a 16-page report providing background and context on IFRS in the United States. The report explores how market forces press the issue, cover SEC final report highlights and reaction to the report, summarizes how some companies are preparing for IFRS today, and offers a set of action steps required to put together a logical, cost-efficient readiness plan:
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New private company council includes FASB, but in reduced role, The Journal of Accountancy explains. “This announcement is excellent news for small businesses that have been concerned about the future of US GAAP particularly in relation to an international move toward IFRS,” adds Editor Gail Perry at AccountingWeb. Emily Chasan at the Wall Street Journal reports: The Financial Accounting Foundation’s Board of Trustees voted Wednesday to establish a new Private Company Council that will create exceptions and modifications to U.S. accounting rules as they apply to private companies. The board, which oversees the U.S. Financial Accounting Standards Board, said…