Project Update

Accounting for Financial Instruments—Credit Impairment

Last updated on February 19, 2015. 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 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 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 (February 11, 2015)

Disclosure Requirements for AFS Debt Securities

The Board decided to retain the disclosure requirements in current GAAP for AFS debt securities, updated for the general principles within the proposed Update regarding disclosing credit risk.

Roll-Forward Disclosures

The Board decided not to require disclosure of a period-to period roll-forward of an entity’s portfolio of loans and debt securities measured at amortized cost and debt securities measured at fair value through other comprehensive income.

The Board affirmed the proposed requirement to disclose a period-to-period roll-forward of an entity’s allowance for expected credit losses, both for financial assets measured at amortized cost and fair value through other comprehensive income.

The Board decided to require that the credit quality indicators for all classes of financing receivables (excluding revolving lines of credit such as credit cards) that are disclosed under current GAAP be disaggregated by year of the asset’s origination (that is, vintage year). The Board decided to limit the disaggregation by vintage year to no more than five annual reporting periods, with the balance for financing receivables originated before the fifth annual reporting period shown in aggregate. The Board decided that for an interim reporting period, the year-to-date (YTD) originations of the current annual reporting period would be considered to be current-period originations. For example, in the second quarter of 20X8 annual reporting period the entity would disclose the originations for YTD 20X8, 20X7, 20X6, 20X5, 20X4, and 20X3 and prior years. The Board directed the staff to perform outreach to understand the usefulness, costs, and operability issues with preparers, users, auditors, and financial institution regulators for this disclosure requirement, and on the basis of the feedback received, the Board may reconsider the alternatives to the roll-forward disclosure requirements at a future meeting.

Definition of Originations

The Board decided that for the purpose of determining the vintage year for disaggregated credit quality disclosures, an entity would use the guidance for determining a new loan resulting from loan refinancing or restructurings in current GAAP (paragraphs 310-20-35-9 through 35-12).

Applicability of Disclosure Requirements to Entities Other Than Public Business Entities

The Board decided that the disclosure requirements related to credit risk and the recognition of credit losses should apply to all entities.

Applicability of Disclosure Requirements to Specific Financial Assets

The Board decided that the disclosure requirements that apply to loan commitments also should apply to financial guarantees not accounted for as insurance or at fair value through net income.

The Board decided that the disclosure requirements related to credit risk and the recognition of credit losses should apply to loans made by a not-for-profit entity to meet its mission.

The Board decided that all disclosure requirements related to credit risk and the recognition of credit losses, except for the requirement to disaggregate the credit quality indicators of those receivables by vintage, should apply to reinsurance receivables.

*Tentative Board Decisions to Date (as of February 11, 2015) 

Tentative Board Decisions to Date During Redeliberations

*Next Steps

At the next meeting the Board plans to discuss transition guidance..

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.

*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

Rahul Gupta
Project Manager
rgupta@fasb.org

Jack Pohlman
Practice Fellow
jpohlman@fasb.org

Michael Cahill
Postgraduate Technical Assistant
mpcahill@fasb.org

Jeff Bjorkman
Postgraduate Technical Assistant
jpbjorkman@fasb.org

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

Anna Rose
XBRL Project Research Associate
arose@fasb.org