United States

Financial instruments: FASB issues standard on recognition and measurement

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January 2016

Our white paper, Financial instruments: FASB issues standard on recognition and measurement, provides an in-depth analysis of Accounting Standards Update (ASU) 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which was issued by the Financial Accounting Standards Board (FASB) on January 5, 2016. The ASU applies to all entities that hold financial assets or owe financial liabilities and represents the finalization of one component of the FASB’s broader financial instruments project. A final standard on the measurement of credit losses on financial assets and an exposure draft on hedging may not be far behind as both are expected to follow in the first and second quarters of 2016, respectively (refer to our summary, FASB/IASB joint project: Financial instruments for additional information). While the ASU is not first effective until 2018 for calendar year public business entities, certain provisions can be early adopted. 

Our white paper analyzes the changes made by the ASU to the existing guidance in the following areas:  

  • Measurement of equity securities
  • Valuation allowance for deferred tax assets associated with available-for-sale debt securities
  • Recognition of changes in fair value of liabilities attributable to instrument-specific credit risk 
  • Financial instrument disclosure requirements 

In addition, our white paper outlines the effective date and transition provisions and discusses how to plan ahead for implementation. It concludes with a discussion on convergence and a chart that provides a comparison of current U.S. generally accepted accounting principles to the ASU and International Financial Reporting Standards 9, Financial Instruments.

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