NEWS RELEASE 07/21/10
FASB Issues Accounting Standards Update No. 2010-20, Disclosures about
the Credit Quality of Financing Receivables and the Allowance for Credit
LossesNorwalk, CT, July 21, 2010—The Financial
Accounting Standards Board (FASB) has issued Accounting Standards Update
(Update) No. 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. The Update will improve
transparency in financial reporting by public and nonpublic companies that hold
financing receivables, which include loans, lease receivables, and other
long-term receivables. The Update requires companies to provide more information
in their disclosures about the credit quality of their financing receivables and
the credit reserves held against them.
“The global financial crisis
highlighted the need for additional information about a company’s financial
instruments, including loans and other financing receivables,” stated FASB
Chairman Robert H. Herz. “This Update provides greater transparency for
investors and other users of financial statements by requiring more information
from companies about credit risk exposures for financing receivables and the
related credit reserves.”
The additional disclosures required for
financing receivables include:
Under the Update, a
company will need to disaggregate new and existing disclosures based on how it
develops its allowance for credit losses and how it manages credit exposures.
- Aging of past due receivables,
- Credit quality indicators, and
- Modifications of financing receivables.
Short-term accounts receivables, receivables measured at fair value or
lower of cost or fair value, and debt securities are exempt from the Update.
For public companies, the amendments that require disclosures as of the
end of a reporting period are effective for periods ending on or after December
15, 2010. The amendments that require disclosures about activity that occurs
during a reporting period are effective for periods beginning on or after
December 15, 2010. For nonpublic companies, the amendments are effective for
periods ending on or after December 15, 2011.
The Update is available at
the Financial Accounting Standards Board
Since 1973, the
Financial Accounting Standards Board has been the designated organization in the
private sector for establishing standards of financial accounting and reporting.
Those standards govern the preparation of financial reports and are officially
recognized as authoritative by the Securities and Exchange Commission and the
American Institute of Certified Public Accountants. Such standards are essential
to the efficient functioning of the economy because investors, creditors,
auditors, and others rely on credible, transparent, and comparable financial
information. For more information about the FASB, visit our website at www.fasb.org.