FASB Proposes Targeted Transition Relief for Credit Losses Standard
FASB issued exposure draft for a proposed Accounting Standards Update (on Topic 326) that would ease transition to the credit losses standard by providing the option to measure certain types of assets at fair value. The amendments in this proposed update amend the transition guidance of Topic 326 and would apply to all reporting entities within the scope of that Topic. Stakeholders can review and provide comments on the proposal by March 08, 2019. FASB also proposed the taxonomy improvements associated with the proposed changes in this exposure draft.
In June 2016, FASB had issued the Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The credit losses standard introduced the expected credit losses method for measuring credit losses on financial assets measured at amortized cost, replacing the previous incurred loss method. It also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis. Some stakeholders—including auto financing institutions that extend credit to borrowers with limited or impaired credit histories—noted that certain financial statement preparers have begun (or are planning) to elect the fair value option on newly originated or purchased financial assets that have historically been measured at amortized cost. They noted that electing the fair value option would require them to maintain dual measurement methods—fair value measurements and amortized cost basis.
To address this issue, the proposed Accounting Standards Update would allow preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis on adoption of the credit losses standard. This would increase the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users. Additionally, for entities that have not yet adopted the amendments in Update 2016-13 as of the issuance date of a final update of these proposed amendments, the effective date and transition methodology would align with that in Update 2016-13. For entities that have adopted the amendments in Update 2016-13 as of the issuance date of a final update of these proposed amendments, FASB will determine the effective date and transition requirements for the amendments in this proposed update after it considers stakeholder feedback on this proposed update.
The provisions of this Exposure Draft, if finalized as proposed, would require improvements to the U.S. GAAP Financial Reporting Taxonomy. FASB welcomes comments on these proposed improvements to the Taxonomy through Proposed Taxonomy Improvements. After FASB has completed its deliberations and issued a final Accounting Standards Update, the proposed improvements to the Taxonomy will be finalized as part of the annual release process.
- News Release
- Exposure Draft (PDF)
- Proposed Taxonomy Improvements (PDF)
- Overview of Credit Losses Standard
Comment Due Date: March 08, 2019
Keywords: Americas, US, Accounting, Banking, Topic 326, Accounting Standards Update, Credit Losses Standard, Taxonomy, IFRS 9, Financial Instruments, FASB
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Dieter Van der Stock
IFRS subject matter expert; LDTI subject matter expert; accounting authority; risk management specialist
Previous ArticleAPRA Releases Instructions for Updating D2A to Replace AUSkey
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023