Issue Information ‐ TOC

Published date01 March 2017
Date01 March 2017
VOLUME 28, NUMBER 3 • March/April 2017
The Journal of
Letter From the Editor
James B. Edwards
Accounting for Private Company Interest Rate Swaps: An Overview With Planning
Danny P. Hollingsworth and John M. Trussel
The Financial Accounting Standard Board’s (FASB) Private Company Council (PCC) was
created in 2012 to improve the accounting standard-setting process for private companies.
Due to influence from PCC, the FASB issued Accounting Standards Update No. 2014-03 in
January 2014 to address accounting for interest rate swaps for cer tain private companies.
The issue addressed was the complexity of complying with ASC 815 rules that are highly
detailed and difficult to implement. The FASB Update provides an alternative, simplified hedge
accounting, for receive-variable, pay-fixed interest rate swaps if certain criteria are met. This
accounting method allows private companies to more easily classify these interest rate swaps
as cash flow hedges, which will reduce income volatility and aid in compliance. This article
provides an overview of the provisions of this update and offers planning strategies for maxi-
mizing the benefits and minimizing the costs of receive-variable, pay-fixed interest rate swaps.
An Analysis of Auditors’ Perceptions Related to Fair Value Estimates
Susan D. Hermanson, William A. Kerler III, and Julian D. Rojas
This study investigates auditors’ understanding of Level 1, 2, and 3 fair value estimates (FVEs)
and their perceptions of the adequacy of the associated auditing standards and internal firm
guidance. The results indicate that Level 1 and Level 2 FVEs are encountered more frequently
than Level 3 FVEs, and that auditors perceive themselves to have the greatest knowledge and
comfort related to Level 1 FVEs followed by Levels 2 and 3, respectively. Auditors believe
Level 3 FVEs are the most difficult to audit, while Level 1 FVEs are the least difficult to audit.
While still overall confident, auditors are the least confident opining on financial statements
with significant Level 3 FVEs, followed by financial statements with Level 2 and Level 1 FVEs,
respectively. Auditors believe professional auditing standards, internal firm guidance, and
required disclosures related to FVEs are all adequate. Finally, auditors believe determining

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT