FASB Proposes Improvements to Credit Losses Standard in US
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.
Related Links
Comment Due Date: July 29, 2019
Keywords: Americas, US, Accounting, Banking, Credit Loss Standard, Topic 326, Accounting Standards Update, IFRS 9, FASB
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Anna Krayn
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
Previous Article
IAIS Publishes Newsletter for September 2019Related Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
