FASB proposed an Accounting Standards Update to address issues raised by stakeholders during the implementation of Accounting Standards Update No. 2016-13, which is titled "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The key issues addressed in this proposal relate to the treatment of negative allowances, transition relief for troubled debt restructurings, and disclosures for accrued interest receivables. Stakeholders are encouraged to review and provide input on the proposal by July 29, 2019.
A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset—but then later determines that the amount written off, or a portion of that amount, will be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets). In response to this question, the proposed Accounting Standards Update would permit organizations to record negative allowances on PCD assets. In addition to other narrow technical improvements, the proposed Accounting Standards Update would also reinforce the existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.
Other key amendments in the proposed Accounting Standards Update include the following:
- Transition Relief for Troubled Debt Restructurings—The proposed amendments would provide transition relief by permitting entities to adjust the effective interest rate on existing troubled debt restructurings, using prepayment assumptions on the date of adoption of Topic 326 rather than the prepayment assumptions in effect immediately before the restructuring.
- Disclosures Related to Accrued Interest Receivables—The proposed amendments would extend the disclosure relief for accrued interest receivable balances to additional relevant disclosures involving amortized cost basis.
Comment Due Date: July 29, 2019
Keywords: Americas, US, Accounting, Banking, Credit Loss Standard, Topic 326, Accounting Standards Update, IFRS 9, FASB
Previous ArticleIAIS Publishes Newsletter for September 2019
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.