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FinREC Issues Draft Implementation Guidance for FASB Credit Loss Standard

August 16, 2018

The American Institute of Certified Public Accountants’ Financial Reporting Executive Committee (“FinREC”) has issued the following working drafts on the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:

  • Working Draft: Allowance for Credit Losses Implementation Issue #1: Zero Expected Credit Losses: This working draft offers guidance for situations when a lender may experience no credit loss, even for a defaulted asset. The draft features implementation guidance for applying the zero-loss assumption to instruments like Treasury securities or mortgage bonds supported by the Federal National Mortgage Association.
  • Working Draft: Allowance for Credit Losses Implementation Issue #22: Reversion Method: Estimation vs. Accounting Policy: This working draft offers guidance for estimating the allowance for loan losses and the judgment that may be used in obtaining the estimate.

Both drafts are intended to assist lending institutions and insurers apply the Financial Accounting Standards Board’s credit loss standard.

Comments on the working drafts are due Wednesday, October 10.