New Guidance on Accounting for Credit Losses has been Issued by FASB

TCF Admin

June 24, 2016


The Financial Accounting Standards Board, or FASB, has issued an Accounting Standards Update (ASU) that improves financial reporting. This updated requires timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

This ASU was put in place to make sure organizations measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions will be able to use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques used today will still be permitted, but the inputs of those techniques will change to reflect the full amount of expected credit losses.

“The new standard addresses concerns from a wide range of our stakeholders—including financial statement preparers and users—that the existing incurred loss approach provides insufficient information about an organization’s expected credit losses,” FASB Chair Russell G. Golden said.

The ASU on credit losses will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years beginning after December 15, 2019.

Read about the entire update here.