FASB Issues Targeted Transition Relief to Institutions Applying the Credit Losses Standard
Norwalk, CT, May 15, 2019—The Financial Accounting Standards Board (FASB) today issued an Accounting Standards Update (ASU) that eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value.
Issued in 2016, the credit losses standard introduced the expected
credit losses method for measuring credit losses on financial assets
measured at amortized cost, replacing the previous incurred loss method.
It also modified the accounting for available-for-sale debt securities,
which must be individually assessed for credit losses when fair value
is less than the amortized cost basis.
Some stakeholders—including auto financing institutions that extend
credit to borrowers with limited or impaired credit histories—noted that
certain financial statement preparers have begun (or are planning) to
elect the fair value option on newly originated or purchased financial
assets that have historically been measured at amortized cost.
They noted that electing the fair value option would require them
to maintain dual measurement methods—fair value measurements and
amortized cost basis.
The new 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. This increases 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
For institutions that have not yet adopted the credit losses standard,
the new ASU will be effective when they implement the credit losses
For institutions that have already adopted the credit losses standard,
the new ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years. Early
adoption is permitted in any interim period after the issuance of the
new ASU as long as an institution has adopted the credit losses
The ASU is available at www.fasb.org.