FASB published a summary of the Board's tentative decisions at the April 10, 2019 meeting, including decisions related to the Targeted Transition Relief under the credit losses standard.
The Board discussed the comments received on the proposed Accounting Standards Update, Targeted Transition Relief for Topic 326, Financial Instruments—Credit Losses. The Board affirmed its decisions to permit an entity to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, for certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. An entity would be required to apply the election on an instrument-by-instrument basis for eligible instruments on adoption of Topic 326. Also affirmed was the decision to exclude debt securities classified as held-to-maturity from the scope of instruments eligible for the transition relief and the decision to not provide an option to discontinue fair value measurements for financial assets measured at fair value through net income and instead apply the measurement guidance in Subtopic 326-20. With regard to the transition, the Board decided the following:
- For an entity that has not yet adopted the amendments in Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the entity should apply the effective date and transition method for the amendments in this Update using the same effective date and transition method of Update 2016-13.
- For an entity that has adopted the amendments in Update 2016-13, the entity should apply the amendments in this Update for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities should apply the amendments on a modified retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance as of the beginning of the first reporting period in which Update 2016-13 was adopted. Early adoption will be permitted in any interim period within the fiscal years beginning after December 15, 2018, provided that an entity has adopted Update 2016-13.
The Board concluded that it has received sufficient information and analysis to make an informed decision and that the expected benefits of the amendments will justify the expected costs. Finally, the Board directed the staff to draft an Accounting Standards Update for vote by written ballot.
Keywords: Americas, US, Banking, Accounting, CECL, Credit Risk, IFRS 9, Credit Losses Standard, Financial Instruments, Topic 326, FASB
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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