SUMMARY OF BOARD DECISIONS

Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

September 7, 2012 FASB Board Meeting

Accounting for financial instruments: impairment. At the September 7, 2012 Board meeting, the Board continued its development of the Current Expected Credit Loss (CECL) Model.

The Board discussed the inclusion of a nonaccrual concept in the financial instrument model. The Board tentatively decided that, for purposes of interest income recognition, an entity should cease the accrual of interest income when it is not probable that the entity will receive full payment of principal or interest (that is, when the entity can no longer assert that the likelihood of collection is probable). If it is not probable that the entity will receive full payment of principal, the entity should apply the cost recovery method to account for payments received when a loan is placed on nonaccrual status. If it is probable that the entity will receive full payment of principal but it is not probable that the entity will receive full payment of interest, the entity should apply the cash basis method to account for payments received when a loan is placed on nonaccrual status.

The Board also discussed how the CECL model would apply to debt securities and financial assets measured at fair value through other comprehensive income (FV-OCI). The Board tentatively decided that the CECL model should apply to financial assets classified at amortized cost and financial assets measured at FV-OCI. However, as a practical expedient, an entity need not recognize expected credit losses for financial assets classified as FV-OCI when both of the following conditions are met:

  1. The fair value of the financial asset is greater than the amortized cost basis.
     
  2. Expected credit losses on the financial asset are insignificant.