The Financial Accounting Standards Board (FASB) has issued an Exposure Draft of a proposed Accounting Standards Update (Update) intended to increase transparency in financial reporting about troubled debt restructurings.

Currently, there is diversity in practice in identifying loan modifications that constitute troubled debt restructurings. The proposed Update sets forth proposed guidance to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment and for disclosure of troubled debt restructurings. The clarifying guidance in this proposed Update is intended to result in more consistent application of GAAP for debt restructurings.

"Investors, regulators, and practitioners asked the Board to clarify what types of loan modifications should be considered troubled debt restructurings for accounting and disclosure purposes," states FASB Acting Chairman Leslie Seidman. "We encourage our constituents to review and comment on the Board's suggested guidance on how to create greater consistency and transparency in the reporting of these transactions."

If approved, the proposed clarifications would be effective for interim and annual periods ending after June 15, 2011, and would be applied retrospectively to restructurings occurring on or after the beginning of the earliest period presented.

The comment period for the proposed Update extends through December 13, 2010. The Exposure Draft is available at www.fasb.org.