Project Update

Accounting for Financial Instruments—Credit Losses

Last updated on May 20, 2016. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process.


Project Objective and Background
Due Process Documents
*Decisions Reached at the Last Meeting
*Tentative Board Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates—Current
*Contact Information


Project Objective and Background

This project addresses issues related to the impairment reporting of credit losses of financial assets. The objective of this project is to significantly improve the decision usefulness of financial instrument reporting for users of financial statements. The Boards believe that simplification of the accounting requirements for financial instruments should be an outcome of this improvement. The Boards’ goal is to develop a single credit loss model for financial assets that enables more timely recognition reporting of credit losses.

Click here for the project objective and background information on the overall Accounting for Financial Instruments project.

Due Process Documents

FASB Due Process Documents

On December 20, 2012, the FASB issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15). The comment period ended on May 31, 2013.
  • Download the Proposed Update on Credit Losses
  • Read the news release introducing the proposed Accounting Standards Update
  • Read the FASB In Focus which summarizes the proposed Accounting Standards Update
  • Listen to a podcast in which FASB member Tom Linsmeier provides an overview of the proposed Accounting Standards Update
  • Listen to a podcast in which FASB members Larry Smith and Hal Schroeder discuss key concepts underpinning the credit loss model in the proposed Accounting Standards Update
  • Read the Frequently Asked Questions document about the proposed Accounting Standards Update
  • Read comment letters on the proposed Accounting Standards Update
  • Read a summary of feedback received on the proposed Accounting Standards Update
On May 26, 2010, the FASB issued one comprehensive proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities—Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815). The comment period ended on September 30, 2010.
Joint Due Process Documents

On January 31, 2011, the FASB and the IASB proposed a common solution for impairment accounting, Supplementary Document—Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities—Impairment. The comment period ended on April 1, 2011.
IASB Due Process Documents

In July 2014, the IASB published the final version of IFRS 9 Financial Instruments.

IFRS 9 Financial Instruments

Click here to access the IASB's impairment project page for more information about the IASB’s deliberations.

*Decisions Reached at the Last Meeting (April 27, 2016)

The Board continued redeliberations on its December 2012 proposed Accounting Standards Update, Financial Instruments—Credit Losses (Subtopic 825-15), specifically discussing vintage disclosures, effective dates, and analysis of the costs and benefits.

Vintage Disclosures

The Board decided not to make any amendments for public business entities that are U.S. Securities and Exchange Commission (SEC) filers for the vintage disclosures.

The Board decided that public business entities that are not SEC filers would be permitted to provide their vintage disclosures using a phase-in transition approach. The phase-in transition approach would require three origination years to be disclosed (including the originations during the first year of adoption), and then an incremental year for every fiscal year thereafter until five separate fiscal years are disclosed, consistent with SEC filers. For example, the phase-in transition approach would work as follows assuming a calendar-year-end company:
  1. For the first annual reporting period ended December 31, 2021 after the adoption date of January 1, 2021, an entity would disclose the end-of-period amortized cost basis of the current-period originations within 2021, as well as the two origination years of 2020 and 2019. The December 31, 2021 ending amortized cost basis would be presented in aggregate for all origination periods before the three years that are separately presented.
  2. For the second annual reporting period ended December 31, 2022, an entity would disclose the end-of-period amortized cost basis of the current-period originations within 2022, as well as the three origination years of 2021, 2020, and 2019. The December 31, 2022 ending amortized cost basis would be presented in aggregate for all origination periods before the four years that are separately presented.
  3. For the third annual reporting period ended December 31, 2023, an entity would disclose the end-of-period amortized cost basis of the current-period originations within 2023, as well as the four origination years of 2022, 2021, 2020, and 2019. The December 31, 2023 ending amortized cost basis would be presented in aggregate for all origination periods before the five years that are separately presented.
  4. For interim period disclosures within the years discussed above, the current year-to-date originations would be disclosed as the originations in the interim reporting period.
The Board decided that all other entities, including not-for-profit organizations and employee benefit plans, would not be required to disaggregate credit quality indicators by the year of origination.

Effective Dates

The Board decided to defer the planned effective dates by one year to the following:
  1. For public business entities that meet the definition of an SEC filer, the forthcoming standard will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
  2. For other public business entities, the forthcoming standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
  3. For all other entities, including not-for-profit organizations and employee benefit plans, the forthcoming standard will be effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.
  4. Early adoption will be permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Analysis of the Costs and Benefits

The Board decided that it has received sufficient information and analysis to make an informed decision on the perceived benefits and related costs of the changes to GAAP that will result from the forthcoming credit losses standard. The Board concluded that the benefits of those changes justify the related costs and directed the staff to draft a final Accounting Standards Update for vote by written ballot.

*Tentative Board Decisions to Date (as of April 27, 2016) 

Tentative Board Decisions to Date During Redeliberations

*Next Steps

The staff will discuss with the Board, at a future public meeting, cost-benefit and complexity of the decisions reached to date, and permission to ballot.

*Board/Other Public Meeting Dates—Current

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*April 27, 2016 Board Meeting—Decisions regarding vintage disclosures, effective dates, and cost and benefit considerations for the final standard.
December 21, 2015 Board Meeting—Decisions regarding the accounting for purchased financial assets with credit deterioration and the treatment of premiums and discounts when measuring credit losses.
November 23, 2015 Board Meeting—Discussions regarding the circularity issues with purchased financial assets with credit deterioration
November 11, 2015 Board Meeting—Decisions regarding the summary of external review comments, accounting for troubled debt restructurings by creditors, available-for-sale credit loss model, and effective date and early application
April 22, 2015 Board Meeting—Decisions regarding purchased credit impaired assets
March 11, 2015 Board Meeting—Decisions regarding transition requirements
February 11, 2015 Board Meeting—Decisions regarding disclosures and disclosures related to previous scope decisions
October 29, 2014 Board Meeting—Decisions regarding disclosures and the scope of the CECL model.
September 3, 2014 Board Meeting—Decisions regarding writeoff guidance, consideration of extensions, renewals, and modifications in estimating the allowance for expected credit losses, and estimating expected credit losses on loan commitments.
August 13, 2014 Board Meeting—Decisions regarding impairment of debt securities and clarifications to the measurement principle.
June 11, 2014 Board Meeting—Decisions about financial assets subsequently identified for sale and certain beneficial interests in securitized financial assets.
March 12, 2014 Board Meeting—Decisions about the application of the CECL model to financial assets measured at FV-OCI.
February 19, 2014 Board Meeting—Decisions about nonaccrual, purchased credit impaired financial assets, and troubled debt restructurings.
December 18, 2013 Board Meeting—Decision to continue to refine the CECL Model
September 17, 2013 Joint Board Meeting—Decisions about an entity’s estimate of expected credit losses.
July 23, 2013 Joint Board Meeting—Discussions about the feedback received on each Board’s expected credit loss proposal.
March 28, 2013 Board Meeting—Decision about whether to extend the comment letter period of the proposed Update.
November 20, 2012 Joint Board Meeting—Discussions about the FASB’s Current Expected Credit Loss Model.
October 31, 2012 Board Meeting—Decisions about issues related to the current expected credit loss model including complexity and whether to proceed with drafting a proposed Accounting Standards Update for vote by written ballot.
October 10, 2012 Board Meeting—Decisions about modifications, reexposure, and transition
October 3, 2012 Board Meeting—Decisions about disclosures for the current expected credit loss model.
September 7, 2012 Board Meeting—Decisions about accounting for loans on nonaccrual status and accounting for the impairment of debt securities and assets measured at FV-OCI.
August 22, 2012 Board Meeting—Decisions about an alternative impairment model.
August 1, 2012 Board Meeting—Decisions about exploring an alternative expected loss model.
July 18, 2012 Joint Board Meeting—Decisions about the impairment of loan commitments and financial guarantees and disclosures for the impairment model.
May 21, 2012 Joint Board Meeting—Decisions about the application of the “three-bucket” model to lease receivables.
May 9, 2012 Board Meeting—Decisions about the “three-bucket” impairment model, including application of the model to modifications of debt instruments
April 18, 2012 Joint Board Meeting—Decisions about the measurement objective and the application of the “three-bucket” model to certain trade receivables
February 28, 2012 Joint Board Meeting—Decisions about the “three-bucket” impairment model, including whether financial assets that have been transferred to Bucket 2 or Bucket 3 could be subsequently transferred to Bucket 1 and the application of the model to trade receivables
January 27, 2012 Joint Board Meeting—Decisions about the application of the “three-bucket” impairment model to purchased financial assets with an explicit expectation of credit losses at acquisition
December 14–15, 2011 Joint Board Meeting—Decisions about the “three-bucket” impairment model, including the measurement of the allowance balance in Bucket 1, the principle for when recognition of lifetime losses is appropriate, the grouping of assets, the difference between Bucket 2 and Bucket 3, and the application of the model to loans and publicly traded debt instruments
October 20, 2011 Joint Board Meeting—Decisions about initial classification of financial assets into buckets in the “three-bucket approach” for impairment of financial assets
September 21, 2011 Joint Board Meeting—Decisions about initial classification of financial assets into buckets and transfers between buckets in the “three-bucket approach” for impairment of financial assets
July 20, 2011 Joint Board Meeting—Decisions about transfers between buckets in the “three-bucket approach” for impairment of financial assets. Decisions about the measurement of expected losses for Bucket 1.
June 15, 2011 Joint Board Meeting—Decisions about a “three-bucket” impairment model for financial assets
May 18, 2011 Joint Board Meeting—Decisions about the way forward on the impairment project considering the feedback received on the supplementary document.
April 14, 2011 Joint Board Meeting—Decisions about the definition of amortized cost, interest income recognition, discounting of expected losses, and non-accrual guidance
April 13, 2011 Joint Board Meeting—Outreach and comment letter summaries on the Joint Supplementary Document on– impairment accounting.
March 29, 2011 Joint Board Meeting—Decisions about the accounting for credit impairment on purchased debt instruments.
March 22, 2011 Joint Board Meeting—Decisions about the objective of expected loss measurement.
February 17, 2011 Joint Board Meeting—Decisions about the definition of write-off for financial assets
January 18, 2011 Joint Board Meeting—Decisions about the comment period for the joint supplemental document on credit impairment of financial assets
December 16, 2010 Joint Board Meeting—Decisions about the accounting for credit impairment of financial assets
December 8, 2010 Joint Board Meeting—Discussions about various methods of accounting for credit impairment of financial assets
November 17, 2010 Joint Board Meeting—Discussions about various methods of accounting for credit impairment of financial assets
November 10, 11, 12, 2010 Joint Board Meeting—Decision about credit impairment outlook period and discussions about timing of credit impairment recognition

Click here for minutes of public meetings on the accounting for financial instruments project that were held prior to the issuance of the May 2010 proposed Update on financial instruments.

*Contact Information

Jack Pohlman
Practice Fellow
jpohlman@fasb.org

Andrew Thornburg
Associate Industry Fellow
athornburg@fasb.org

Emily De Revere
Project Research Associate
ederevere@fasb.org

Dominick Viramontes
Postgraduate Technical Assistant
drviramontes@fasb.org

Josh Seward
Postgraduate Technical Assistant
jdseward@fasb.org

David M. Shaw
XBRL Assistant Project Manager
dmshaw@fasb.org

Anna Rose
XBRL Project Research Associate
arose@fasb.org