SUMMARY OF BOARD DECISIONS
Summary of Board decisions are provided for the information and
convenience of constituents who want to follow the Board´s deliberations. All of
the conclusions reported are tentative and may be changed at future Board
meetings. Decisions are included in an Exposure Draft for formal comment only
after a formal written ballot. Decisions in an Exposure Draft may be (and often
are) changed in redeliberations based on information provided to the Board in
comment letters, at public roundtable discussions, and through other
communication channels. Decisions become final only after a formal written
ballot to issue an Accounting Standards Update.
October 10, 2012 FASB Board MeetingAccounting
for financial instruments: impairment. The Board discussed
modifications, reexposure of the revised credit impairment model, and transition
guidance for the Current Expected Credit Loss (CECL)
The Board tentatively decided to
move forward with the CECL model without broadly reconsidering the accounting
for modifications. Accordingly, the Board tentatively decided that the CECL
model would apply to all modified instruments, where expected credit losses are
(1) based on the expected shortfall in contractual cash flows (that is, the
contractual cash flows to which the entity is legally entitled
post-modification) and (2) discounted using the effective interest rate
post-modification. To accomplish this, the guidance in Subtopic 310-40 would be
amended to require that when an entity executes a troubled debt restructuring,
the cost basis of the asset should be adjusted so that the effective interest
rate post-modification is the same as the original effective interest rate,
given the new series of contractual cash flows. The basis adjustment would be
calculated as the amortized cost basis before modification less the present
value of the modified contractual cash flows (discounted at the original
effective interest rate).
Reexposure of the Revised Credit
The Board tentatively decided to reexpose the model
in an Exposure Draft separate from its tentative proposals on the classification
and measurement of financial instruments.
Transition Guidance for the
The Board tentatively decided that the transition method
for the CECL model would be a cumulative-effect approach. Under this approach,
an entity would record a cumulative-effect adjustment to its statement of
financial position as of the beginning of the first reporting period in which
the guidance is effective.
The Board also discussed transition
disclosures. The Board tentatively decided that upon transition an entity should
disclose the following:
- The nature and reason for the change in accounting principle, including an
explanation of the newly adopted accounting principle.
- The method of applying the adoption.
- The effect of the adoption on any line item in the statement of financial
position, if material, as of the beginning of the first period for which the
guidance is effective. Presentation of the effect on financial statement
subtotals is not required.
- The cumulative effect of the change on retained earnings or other
components of equity in the statement of financial position as of the
reporting period that immediately precedes the effective date.