FASB Issues ASU to Ease Transition to the Credit Losses Standard

The FASB has issued an Accounting Standards Update (ASU), Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief.

The ASU “allows an option for 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.” The overall purpose of the new guidance is to enhance “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.”

For entities that have not yet adopted the credit losses standard, the ASU will be effective when the credit losses standard is implemented. For entities that have adopted the credit losses standard, the ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For more information, see Deloitte's related Heads Up newsletter as well as the press release and ASU on the FASB’s Web site.