FASB Extends Comment Deadline on Proposal for Accounting for Credit Losses
by Terri Eyden on
By Frank Byrt
The Financial Accounting Standards Board (FASB) voted March 28 to extend the comment deadline for its proposal to improve financial reporting on expected credit losses on loans and other financial assets held by banks, financial institutions, and other public and private organizations, as FASB and the International Accounting Standards Board (IASB) continue to work toward a common standard.
The new comment deadline on Proposed Accounting Standards Update, Financial Instruments – Credit Losses (Subtopic 825-15) is May 31, 2013.
The decision to extend the deadline came in response to stakeholder requests for more time to consider the FASB's proposals on credit losses, on the heels of FASB's release of its "Frequently Asked Questions" document issued March 25.
Stakeholders also expressed a desire to consider the IASB's proposal on credit losses, which was issued for public comment on March 7, 2013, FASB said.
"The FASB decided to extend the comment period on its credit losses proposal in response to stakeholders' requests for more time to consider this important issue," said FASB Chairman Leslie F. Seidman. "Given our strong desire for a converged standard, the FASB encourages stakeholders to also consider the proposal issued by the IASB, which differs in some respects, and to share your views on the appropriate path forward."
The FASB's proposed model would utilize a single "expected credit loss" measurement objective for the recognition of credit losses, replacing the multiple existing impairment models in US GAAP. The current models generally require that a loss be "incurred" before it is recognized. Under the FASB proposal, management would be required to estimate the cash flows that it does not expect to collect using all available information, including historical experience and reasonable and supportable forecasts about the future.
The FASB model and the IASB model both would require that expected credit losses be estimated based on past events, current conditions, and reasonable and supportable forecasts about the future. The amount of credit loss that is ultimately recognized would be the same under both the FASB and the IASB impairment models.
The difference between the models relates to when losses that are currently expected would be recognized. Under the FASB model, an entity would record its current estimate of expected credit losses every period. The IASB model would record a portion of the expected credit losses until significant credit deterioration has occurred, at which point the full estimate of expected credit losses would be recognized.
The FASB will consider the comments received on its proposal as well as the comments received by the IASB on its proposal.
- FASB Issues FAQs on Proposal to Improve Accounting for Current Expected Credit Losses
- IASB Floats Revised Proposals for Loan-Loss Provisioning
- FASB Overview: New Credit Loss Model
You may like these other stories...
Cybersecurity is no longer the domain of an organization's IT staff. It's moved to the boardroom, and in a big way. Accountants and financial managers may have been thinking it's just the province of the tech...
Boehner addresses GOP priorities ahead of midterm electionsHouse Speaker John Boehner (R-OH) on Thursday delivered what amounted to closing arguments ahead of the November elections, laying out a list of Republican...
Former DOJ Tax Division head Kathryn Keneally joining DLA Piper in New YorkGlobal law firm DLA Piper announced on Thursday that Kathryn Keneally, the former head of the US Justice Department Tax Division, is joining the firm...
Upcoming CPE Webinars
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.