9.2 FASB Activities
This Roadmap discusses the FASB’s standard-setting activities
through April 30, 2025, including the Board’s proposed ASUs on (1) PFAs (issued on June 27, 2023) and (2) a
practical expedient and accounting policy
election for private companies and certain not-for-profit
entities (issued on December 3, 2024).
9.2.1 Proposed ASU on Purchased Financial Assets
On June 27, 2023, the FASB issued a proposed ASU that would broaden the population
of financial assets that are within the scope of the gross-up approach currently
applied to PCD assets under ASC 326. Accordingly, an asset acquirer would apply the
gross-up approach to all financial assets acquired in a business combination in
accordance with ASC 805 rather than first determining whether an acquired financial
asset is a PCD asset or a non-PCD asset. For financial assets acquired as a result
of an asset acquisition or through consolidation of a VIE that is not a business,
the asset acquirer would apply the gross-up approach to seasoned assets, which are
acquired assets unless the asset is deemed akin to an in-substance origination. A
seasoned asset is an asset (1) that is acquired more than 90 days after origination
and (2) for which the asset acquirer was not involved with the origination.
During meetings through April 2025, the FASB redeliberated and discussed feedback
received on the proposed ASU, reaching the following decisions:
- To revise the project objective to improve the accounting for purchased financial assets, excluding PCD. The current accounting for PCD will be retained.
- With certain exceptions (e.g., credit card receivables), the gross-up approach would be used to account for all loans receivable that are acquired through a business combination or asset acquisition — debt securities are not affected.
- The initial amortized cost basis for seasoned loan receivables, excluding credit cards, is calculated as the purchase price plus the initial allowance for credit losses.
- The use of the interest method to recognize as interest income the noncredit discount or premium on seasoned loan receivables, excluding credit cards.
- The guidance in paragraph 310-10-35-53C is not applicable for accruing interest income on seasoned loan receivables, excluding credit cards.
- The guidance in paragraph 326-20-30-13A is not applicable when estimating expected recoveries to measure expected credit losses on seasoned loan receivables, excluding credit cards.
- Entities have an option to remeasure allowances for credit losses by aggregating seasoned loan receivables, excluding credit cards, and existing financial assets based on similar risk characteristics when expected credit losses are estimated using a method other than a discounted cash flow. The election would be made at the first financial statement date after the initial recognition and measurement is recorded as of the acquisition date.
- The amendments will be applied prospectively for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods with early adoption permitted. Early adoption will be permitted.
- No amendments to disclosure requirements.
9.2.2 Proposed ASU on Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities
On December 3, 2024, the FASB issued a proposed ASU that would amend ASC 326 to permit private
companies and certain not-for-profit entities to elect a practical expedient and
accounting policy related to their estimation of expected credit losses for
current accounts receivable and current contract assets that arise from
transactions accounted for under ASC 606.
As stated in the proposal, the amendments would add the following:
- Practical expedient. In developing reasonable and supportable forecasts, an entity may elect a practical expedient that assumes that current conditions as of the balance sheet date persist throughout the forecast period.
- Accounting policy election. An entity that elects the practical expedient would be eligible to make an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses.
The proposed ASU provides examples of how an entity would estimate expected
credit losses upon applying (1) the practical expedient only and (2) both the
practical expedient and the accounting policy election. The proposed guidance
would be applied prospectively; early adoption would be permitted.
During meetings through March 2025, the FASB redeliberated and discussed feedback
received on the proposed ASU, reaching the following decisions:
- All entities should be eligible to elect the practical expedient.
- All entities, other than public business entities, should be eligible to elect the accounting policy election.
- The scope of the guidance is limited to current accounts receivable and current contract assets.
- An entity that elects the practical expedient and/or accounting policy election is required to disclose of the elections in its annual financial statements.
- The amendments will be effective for interim and annual periods beginning after December 15, 2025, with early adoption permitted. Public business entities electing the practical expedient must do so in the first interim or annual period the amendments are effective.