The Financial Accounting Standards Board (FASB) is consulting on proposals for amendments to the transition requirements and scope of the credit losses standard issued in 2016, with the aim of making implementation less complex
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, introduces an expected credit loss model for the impairment of financial assets measured at amortised cost basis. This model replaces the probable, incurred loss model for those assets.
Russell Golder, FASB chairman, said: ‘The proposed accounting standards update (ASU) addresses areas of uncertainty brought to our attention by our stakeholders.
‘It intended to reduce transition complexity and represents our ongoing commitment to support a successful transition to our standards.’
The ASU would require entities other than public business entities to implement the standard for fiscal years beginning after 15 December 2021, including interim periods within those fiscal years. This would align the implementation date for their annual financial statements with the implementation date for their interim financial statements.
Secondly, the proposed ASU clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard.
The deadline for comments is 19 September.
Narrow-scope improvements to credit losses standard is here
Report by Pat Sweet
