NEWS RELEASE 06/27/12
FASB Publishes Proposal for Disclosing Liquidity and Interest Rate
RiskNorwalk, CT, June 27, 2012—The Financial Accounting
Standards Board (FASB) today issued for public comment a proposed Accounting
Standards Update (ASU) intended to improve financial reporting about certain
risks inherent in financial instruments and how they contribute to the reporting
organization's broader risks. Stakeholders are asked to provide input by
September 25, 2012.
The Update is intended to address stakeholders'
concerns about how organizations disclose their exposures to certain risks
related to financial assets, liabilities, obligations, and other financial
instruments. Specifically, the ASU proposes new disclosures related to liquidity
risk and interest rate risk, two risks that were prominent during the recent
financial crisis and that continue to be relevant to reporting organizations on
an ongoing basis. The FASB previously issued enhanced disclosure requirements
about credit risk.
The proposed liquidity risk
disclosures are intended to provide information about the risk that the
reporting organization will encounter difficulty when meeting its financial
obligations, and would apply to all public, private, and not-for-profit
organizations. However, the nature of the disclosures will depend on whether the
reporting organization is considered a financial institution, as defined by the
The proposed interest rate risk
disclosures would apply only to financial institutions and are intended
to provide information about the exposure of financial assets and financial
liabilities to fluctuations in market interest rates.
"As part of the
FASB's financial instruments project, stakeholders consistently requested
improved disclosures about an organization's exposure to interest rate risk and
liquidity risk," said FASB Chairman Leslie F. Seidman. "Therefore, the Board is
proposing guidance that would help users of financial statements better
understand organizations' exposures to risks and the ways in which those risks
The amendments in the proposed ASU on liquidity
risk disclosures would require:
The amendments in the proposed ASU
on interest rate risk disclosures would require a financial
institution to disclose:
- A financial institution to disclose the carrying amounts of classes
of financial assets and financial liabilities in a table, segregated by their
expected maturities, including off-balance-sheet financial commitments and
- A financial institution that is also a depository institution to
disclose information about its time deposit liabilities, including the cost of
funding in a table or list during the previous four fiscal quarters.
- An organization that is not a financial institution to disclose its
expected cash flow obligations in a table, segregated by their expected
maturities, without being required to include the reporting organization's
financial assets in that table.
- All reporting organizations to provide their available liquid funds
in a table, which includes unencumbered cash, high-quality liquid assets, and
- All reporting organizations to provide additional quantitative or
narrative disclosure of the organization's exposure to liquidity risk,
including discussion about significant changes in the amounts and timing in
the quantitative tables and how the reporting organization managed those
changes during the current period.
2010, the FASB issued proposed ASU, Accounting for Financial Instruments and
Revisions to the Accounting for Derivative Instruments and Hedging
Activities-Financial Instruments (Topic 825) and Derivatives and Hedging (Topic
815). As a result of the FASB's outreach and feedback from stakeholders,
the Board decided to publish this proposed Update separately from the
classification and measurement aspects of the project on accounting for
financial instruments. The FASB's redeliberations of the May 2010 proposed ASU
- The carrying amounts of classes of financial assets and financial
liabilities according to time intervals based on the contractual repricing of
the financial instruments.
- An interest rate sensitivity table that presents the effects on net income
and shareholders' equity of hypothetical, instantaneous shifts of interest
- Quantitative or narrative disclosures of the organization's exposure to
interest rate risk, including discussion about significant changes in the
amounts and timing in the quantitative tables and how the reporting
organization managed those changes during the current period.
The FASB has not yet decided on an effective date but plans
to do so after seeking stakeholder comments.
Before the conclusion of
the comment period, the Board will conduct additional outreach with preparers,
users, and auditors of financial statements to solicit their input on the
proposal. Further information including the Exposure Draft, podcast, and a "FASB
In Focus"— a high-level summary of the proposal—is available on the FASB website