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2016

FASB Issues Final Standard on Accounting for Credit Losses (June 17, 2016)

Heads Up | Volume 23, Issue 18
June 17, 2016
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FASB Issues Final Standard on Accounting for Credit Losses

Yesterday, the FASB issued ASU 2016-13,1 which amends the Board’s guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model)2 that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. The ASU is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments.

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