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ASC 326: Credit losses—Abbreviated readiness checklist for nonlenders

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To assist nonlenders with their transition to Topic 326, Financial Instruments—Credit Losses, of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), we have prepared ASC 326: Credit losses—Abbreviated readiness checklist for nonlenders (the checklist), which includes three sections addressing:

  • Recognition and measurement of credit losses on financial assets measured at amortized cost and off-balance-sheet credit exposures.
  • Recognition of credit losses on available-for-sale debt securities.
  • Overall credit loss considerations, including those related to presentation, disclosure, transition, documentation and internal controls. 

While ASC 326 is arguably the most significant fundamental accounting change lenders have ever faced, the scope of ASC 326 extends to assets that are routinely held by nonlenders, including cash equivalents, trade and other receivables, contract assets and debt securities. Substantially all assets within the scope of ASC 326-20 will have an allowance for credit losses.

While the checklist will not alleviate the need to be familiar with the authoritative guidance, nonlenders may find it helpful as they prepare to transition to ASC 326 by the applicable effective date, which for calendar-year-end Securities and Exchange Commission (SEC) filers (other than those that are eligible to be smaller reporting companies [as defined by the SEC]) is January 1, 2020. 

For additional information about ASC 326, refer to Chapters 4 and 6 of our publication, A guide to accounting for investments, loans and other receivables

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