In mid-January 2014, the FASB released Accounting
Standard Update 2014-03 Derivatives and Hedging
(Topic 815): Accounting for Certain Receive – Variable,
Pay – Fixed Interest Rate Swaps (ASU 2014-03). ASU
2014-03 is the second standard issued by the FASB
upon endorsement of a consensus of the Private
Company Council that is specifically designed to
meet the needs of private companies by providing an
alternative within US GAAP.
Companies that are unable to borrow at fixed rates
often rely on variable-rate debt combined with an
interest rate swap. In effect, they receive variable
rates and pay fixed rates. The net effect is similar
to borrowing at fixed rates. But the accounting and
disclosure requirements are considerably more
complex when an interest rate swap is involved.