Bank Regulators Issue Interpretive Guidance for Credit Loss Standard

December 23, 2016

Interpretative guidance has been published describing the scope of Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Issued by federal banking regulators in a frequently asked questions format, the document explains the reasons for the Financial Accounting Standards Board (“FASB”) credit loss standard, the accounting changes, and how banks’ write-down practices should be modified.

ASU No. 2016-13 was issued in June and applies to any banking institutions that file regulatory reports wherein the reporting requirements follow U.S. GAAP. The standard will be effective for public companies in 2020; private companies must apply the standard in 2021. Until then, the current U.S. GAAP guidance for writing down loans and other receivables remain in effect.