Indian Trail, NC (March 2017) – Christine Carlini, a Certified Public Accountant CPA in Indian Trail NC, will be teaching QuickBooks courses in QuickBooks – Level 1 at the Central Piedmont Community College Ballantyne Campus from March 15 – March 24th on Wednesdays and Fridays, from 8:00 a.m.-11:00 p.m.

She is a partner at Carlini CPA, LLC and is a CPA serving Indian Trail, Monroe, Mooresville, Cornelius, University area, and Charlotte, NC. Ms. Carlini brings a wealth of experience to teaching the QuickBooks courses. She is affiliated with the North Carolina Association of Certified Public Accountants, the American Institute of Certified Public Accountants and the Professional Risk Managers’ International Association.

Before owning her own CPA firm in Indian Trail NC, she also had previous appointments as vice president and senior financial analyst for Bank of America – Global Corporate Investment Banking, Consumer Real Estate and Regulatory Reporting. She also worked as an accounting manager for an international software firm and for a manufacturing company.

For more information, call Carlini CPA, PLLC at 704-604-2613 or visit https://www.carlinicpa.com.

By Jeffrey M. Carlini, CPA

Fair value (FASB ASC 820) is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Per the fair value standard, the reporting entity is required to present the quantitative disclosures in a tabular format, segregating investments between level 1, level 2, and level 3 for each year presented in the financial statements.

The levels are defined as follows:

• Level 1 – Quoted prices in active markets for identical assets or liabilities.
• Level 2 – Valuation based on market observables. An identical asset may not exist or the market may be less active or a quoted market price is unavailable.
• Level 3 – Unobservable valuation used when level 1 and level 2 inputs are not available.

Assets that are calculated at Net Asset Value per share (NAV) were being classified inconsistently in financial statements between level 2 and level 3 investments. Investments valued at NAV that are redeemable at the Balance Sheet date are considered level 2. Investments valued at NAV that can never be redeemed are considered Level 3. However, investments valued at NAV that are not redeemable at the Balance Sheet date but are redeemable at some point required professional judgment to determine proper presentation. In an effort to make financial reporting more consistent, FASB recently released ASU 2015-07 entitled “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).”
Who is Affected:
Auditors who examine Service Organization Reports

Main Provisions
To remove the inconsistency of practice regarding assets valued at NAV, the ASU no longer requires these investments to be categorized by level within the fair value hierarchy tabular format.

However, investments that calculate NAV will continue to be included in the fair value hierarchy table to facilitate reconciliation between the fair value disclosures and the financial statements. They will only appear in the total column and not any of the individual levels. In addition, the required disclosures for these investments will continue to be made.

Applying the Standard
This standard becomes effective for public companies for years beginning after December 15, 2015 and for all other entities for years beginning after December 15, 2016. Earlier adoption is permitted. This standard should be applied retrospectively to all periods presented.

This post originally appeared on June 19, 2015 at ncaCPA.com

By Jeffrey M. Carlini, CPA

Background
FASB recently released ASU 2014-03 entitled Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps-Simplified Hedge Accounting Approach. This new standard update is a consensus of the Private Company Council (PCC) and is part of FASB’s new efforts to meet the needs of private companies. In today’s lending climate banks usually lend funds to private companies at a variable interest rate. Many private companies would rather have the certainty of fixed rate debt. Due to this, either at the company’s request or the bank’s, the company enters into an interest rate swap agreement. This swap, commonly known as a “plain-vanilla” swap, will cause the company to pay a fixed rate and receive a variable rate effectively converting their debt to a fixed rate.

The accounting standard that governs these swaps is topic 815, Derivatives and Hedging. Prior to ASU 2014-03, all interest rate swaps including these “plain vanilla” swaps require complex accounting which is difficult for a private company to understand and comply with. Unless stringent criteria are met, the accounting standards require these swaps to be valued at fair value which results in income statement volatility.

Due to private companies’ concerns that the cost benefit and relevance of marking the swaps to market was impractical, the PCC came up with this new standards update applicable to all entities except for public businesses and not-for-profit entities.

Main Provisions
Under this new simplified hedge accounting approach, the interest expense recognized in a receive-variable, pay-fixed interest rate swap arrangement will be similar to the amount that would have been recognized if the entity had originally entered into fixed rate debt.

If the following conditions are met the swap is valued at settlement value instead of fair value:

• Both the interest rate of the borrowing and swap and reset period are based on the same index (e.g. one month LIBOR).
• The terms of the swap are typical and there is no floor or cap on the variable interest rate of the swap unless the borrower has a comparable floor or cap.
• The debt and swap were entered into at the same time or no more than a few days apart.
• The amount of the swap is less than or equal to the principal amount of the debt.
• All interest payments on the borrowed amount during the term of the swap are designated as hedged.

How to Calculate Settlement Value
Settlement value is calculated by performing a present value calculation of the swap’s remaining estimated cash flows, using a valuation technique that is not adjusted for nonperformance risk. By eliminating the need to factor in nonperformance risk, this calculation is made substantially easier.

Applying the Standard
Documentation must be complete by the date on which the first annual financial statements are available to be issued. This is a good for companies because many times they do not consider the accounting implications of interest rate hedges until the year-end financials and disclosures are being prepared.

Any swap entered into prior to or after this standards update can be accounted for under the simplified hedge accounting approach. Disclosures for interest rate swaps are very close to current standards. Note that companies can keep their current accounting models and do not have to adopt this alternative approach. The ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015, with early adoption permitted. This standard update should be a welcome sign to private companies that have been struggling with accounting for these types of swaps.

This post originally appeared on February 20, 2015 at ncaCPA.com