United States

Credit losses: FASB codifies SAB 119


The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) 2020-02, Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842). Among other provisions, this ASU added SEC Staff Accounting Bulletin (SAB) No. 119 to the FASB’s Accounting Standards Codification. SAB 119 aligned the SEC’s interpretive guidance with Topic 326 by adding Section M to Topic 6 of the SAB Series. Topic M discusses the following matters related to the accounting for loan losses by registrants engaged in lending activities subject to Topic 326:

  • Measuring current expected credit losses
  • Development, governance, and documentation of a systematic methodology
  • Documenting the results of a systematic methodology
  • Validating a systematic methodology

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