1.1 Background

The approach used to recognize impairment losses on financial assets has long been identified as a major weakness in current U.S. GAAP, resulting in delayed recognition of such losses and leading to increased scrutiny during the financial crisis. After years of deliberating various models for remedying that weakness (sometimes jointly with the International Accounting Standards Board [IASB®]), the FASB issued its final standard on the measurement of expected credit losses, ASU 2016-13 (codified as ASC 326), in 2016. The timeline below depicts the stages in the Board’s development of that guidance, beginning with the Financial Crisis Advisory Group’s (FCAG’s) recommendation, in 2008, that the FASB and IASB develop a credit loss model that incorporates forward-looking information and eliminates barriers to the timely recognition of losses under incurred loss models.