United States

Proposed amendments to credit losses standard

FINANCIAL REPORTING INSIGHTS  | 

In June 2016 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced a new model for determining the allowance for credit losses known as CECL (current expected credit loss). The effective dates of ASU 2016-13 are as follows:

  • Public business entities (PBEs) that are SEC filers: Fiscal years beginning after December 15, 2019, including interim periods within those years
  • PBEs other than SEC filers: Fiscal years beginning after December 15, 2020, including interim periods within those years
  • All other entities (non-PBEs): Fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021

On August 20, 2018, the FASB issued a proposed ASU that, if finalized, would amend the effective date of ASU 2016-13 for non-PBEs by requiring non-PBEs to adopt the standard for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

The proposal also would clarify the FASB’s original intent to exclude operating lease receivables from the scope of Subtopic 326-20. Rather, impairment of receivables arising from operating leases should be accounted for in accordance with the leases standard.

If finalized, the effective date and transition requirements for the proposed ASU would be the same as those in ASU 2016-13. The proposed ASU, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, is available for comment until September 19, 2018.

Further information about ASU 2016-13 is available in our white papers, New credit losses standard in a nutshell, and Financial instruments: In-depth analysis of new standard on credit losses.