NORWALK, Conn.--(BUSINESS WIRE)--
The Financial Accounting Standards Board (FASB) today voted to extend the comment deadline for its proposal to improve financial reporting about expected credit losses on loans and other financial assets held by banks, financial institutions, and other public and private organizations. The new comment deadline on Proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15) is May 31, 2013.
The decision was made in response to stakeholder requests for more time to consider the FASB's proposals on credit losses as well as the related staff “Frequently Asked Questions” document that was issued earlier this week. Stakeholders also expressed a desire to consider the International Accounting Standards Board's (IASB) proposal on credit losses, which was issued for public comment on March 7, 2013.
"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,” stated 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 U.S. generally accepted accounting principles (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.
The Exposure Draft, including instructions on how to submit written comments, is available at www.fasb.org. The “Frequently Asked Questions” staff document, a FASB in Focus summary, and a podcast on the proposal also are available at the FASB website.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.
Christine Klimek, 203-956-3459