Norwalk, CT, February 6, 2019—The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) that would ease transition to the credit losses standard
by providing the option to measure certain types of assets at fair
value. Stakeholders are asked to review and provide comments on the
proposal by March 8, 2019.
Issued in 2016, the credit losses standard introduced the expected
credit losses method for measuring credit losses on financial assets
measured at amortized cost, replacing the previous incurred loss method.
It also modified the accounting for available-for-sale debt securities,
which must be individually assessed for credit losses when fair value
is less than the amortized cost basis.
Some stakeholders—including auto financing institutions that extend
credit to borrowers with limited or impaired credit histories—noted that
certain financial statement preparers have begun (or are planning) to
elect the fair value option on newly originated or purchased financial
assets that have historically been measured at amortized cost.
They noted that electing the fair value option would require them
to maintain dual measurement methods—fair value measurements and
amortized cost basis.
The proposed ASU would allow preparers to irrevocably elect the fair
value option, on an instrument-by-instrument basis, for eligible
financial assets measured at amortized cost basis upon adoption of the
credit losses standard. This would increase the comparability of
financial statement information provided by institutions that otherwise
would have reported similar financial instruments using different
measurement methodologies, potentially decreasing costs for financial
statement preparers while providing more useful information to investors
and other users.
The proposed ASU is available at www.fasb.org.