As if 2017 doesn’t promise enough drama and change already, the accounting profession is poised for a year brimming with expected regulatory issues and scrutiny.
Bloomberg BNA recently released its 2017 Tax & Accounting Outlook report that covers the gamut of legislative, state, international, and tax administration issues. But it also highlights the following four key accounting issues that could impact practitioners and companies in the new year.
1. Banks and credit losses. New rules on the reporting of loans and other credit losses portend one of the biggest changes ever in the financial accounting of banks and other companies, the report states.
Under Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was issued by the Financial Accounting Standards Board (FASB) last June, banks and other lending institutions will be required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
The “current expected credit loss model,” the core of the new standard, replaces the long-standing accounting model shaped around incurred losses.
This year “promises to be a period of preparing for the sweeping modifications in accounting for credit impairments,” the report states. “Companies have to assess what information must be assembled to shift to the new standard.”
Companies that file reports with the US Securities and Exchange Commission (SEC) will apply the new rules beginning in January 2020. Smaller and private companies have until 2021.
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About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.