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FASB Wants To Change Loan Loss Disclosures Effective This Year

Apr 22nd 2009
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At its board meeting earlier today, the Financial Accounting Standards Board agreed that its soon-to-be-released proposal on Loan Loss Disclosures should be effective this year (specifically, interim and annual reporting periods ending after Dec. 15, 2009).

Effective date of loan loss disclosures decided in contemplation of effective date of upcoming amendments to FAS 140, FIN 46R: Part of the rationale for requiring the new disclosures this year-end, as explained in paragraph 7 (and footnote 1) in today's board handout [additional explanatory info inserted by me in brackets which does not appear in board handout], is that:

"The staff believes it would be beneficial for the effective date [of the Loan Loss Disclosures Statement] to be prior to the proposed effective date for proposed Statement, Accounting for Transfers of Financial Assets, and proposed Statement, Amendments to FASB Interpretation No. 46(R) [Consolidation of Variable Interest Entities]." As noted in footnote 1 in the board handout: "The proposed effective date for these proposed Statements [i.e. the amendment of FAS 140 and FIN 46R] are as of the beginning of each reporting entity’s first fiscal year or first interim reporting period that begins after November 15, 2009."

The staff added, " the disclosures in this project will provide enhanced credit risk information related to the financial assets included in the scope of those two proposed Statements [i.e. the amendment of FAS 140 and FIN 46R]. Therefore, the staff recommends the proposed Statement be effective for interim and annual reporting periods ending after December 15, 2009."

FASB Technical Director Russell Golden also noted that the assets on the balance sheet will be different after the amendments to FAS 140 and FIN 46R come into effect as proposed in 2010.

NOTE: The effective dates listed above for the proposed amendments to FAS 140 and FIN 46R are as proposed for public comment last year; as is done in finalizing all proposed standards, FASB is expected to discuss at an upcoming board meeting the effective date of those standards (i.e. whether to reaafirm the effective date as proposed).

Next steps on loan loss disclosures: FASB staff plan to release the proposal on Loan Loss Disclosures in May for a sixty-day comment period, and currently expect a final standard to be issued by the end of September. Following are some highlights from today's meeting.

Additional details on the proposal can be found here.

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