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Financial Services

FASB Approves Credit Loss Standard

After reviewing the costs and benefits of its new guidance for writing down bad loans and securities, the Financial Accounting Standards Board (“FASB”) voted last week to proceed with a final standard based on the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15). The standard will help companies with the financial reporting of credit losses on loans and other financial instruments, and is expected to be released in June.

Relative to its decision, the FASB has deferred the new standard’s effective date by one year for public companies that fall under the Securities and Exchange Commission filer requirements. Such public companies must apply the forthcoming guidance to fiscal years, and interim periods within those years, starting after December 15, 2019. Other public companies must apply the standard to fiscal years, and interim periods within those years, starting after December 15, 2020.

The standard’s effective date has also been deferred by one year for private companies, nonprofits and employee benefit plans. Such organizations must apply the guidance to fiscal years starting after December 15, 2020, and interim periods within those years starting after December 15, 2021.

All organizations can elect for early adoption of the credit loss standard for fiscal years, and interim periods within those years, starting after December 15, 2018.

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