FASB to Review Guidance on Credit Card Receivables in October
The Financial Accounting Standards Board (“FASB”) plans to address concerns over its credit loss standard. Particularly, the FASB may attempt to clarify guidance for banks estimating the life of instruments such as credit card receivables without a specific payoff date.
Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires banks to disclose their losses on loans, certain debt securities and receivables. Financial professionals, however, haven’t reached a consensus on how to apply some of the requirements to credit card receivables. The standard calls for lenders to estimate the losses on the loan or financial asset’s contractual term. While the contractual term is specified for a portfolio of 30-year mortgages, the term of the loan for a pool of credit cards is less certain.
The discussion on clarifying guidance for credit card receivables is scheduled for early October.