By Frank Byrt
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.