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FASB Issues Amended Guidance for Amortized Premiums

The Financial Accounting Standards Board (“FASB”) has issued new guidance on the amortization of premiums for purchased callable debt securities. Released as Accounting Standards Update No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, the standard reduces the amortization period for a premium to the earliest call date to improve when the interest income is recorded on bonds held either at a premium or a discount with the underlying instrument.

ASU No. 2017-08 takes effect for public companies for the fiscal years, and interim periods within those years, starting after December 15, 2018. All other companies must apply the amendments to fiscal years starting after December 15, 2019, and interim periods within fiscal years starting after December 15, 2020. All entities can elect to adopt the amendments earlier than the effective dates.

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