The US Financial Accounting Standards Board (FASB) on Thursday voted to extend to May 31st the deadline for comments on its Proposed Accounting Standards Update (ASU), Financial Instruments—Credit Losses (Subtopic 825-15). The comment period originally was scheduled to end April 30th.
In comment letters, a handful of organisations asked FASB to extend the comment period to allow them time to compare their expected credit loss model with that of the International Accounting Standards Board (IASB), which has a separate proposal whose comment period expires July 5th.
FASB and the IASB released separate proposals after being unable to reach a consensus on an impairment model in the convergence project.
The Financial Stability Board in October urged the boards to renew their efforts to converge. In comment letters to FASB, organisations such as the Basel Committee on Banking Supervision and the International Banking Federation have encouraged a converged solution.
FASB’s proposal was issued Dec. 20th. FASB Chairman Leslie Seidman said in December that she hoped that after reviewing comments on the separate proposals, the boards still could arrive at a converged standard.
The IASB’s proposal was issued March 7th.
Earlier this week, FASB posted a 16-page FAQ document to its website to provide additional information about its proposal. The project is designed to faithfully represent expected credit losses in order to improve on current guidance that calls for recognition when losses are incurred.
Seidman said Thursday that extending the comment period by a month should give commenters enough additional time to consider the guidance contained in the FAQs. FASB member Tom Linsmeier said the May 31st deadline would provide more time for comment while still giving board members time to thoroughly analyse the comments in preparation for further discussions on convergence.
“I’m also interested in any ideas about how commenters feel about the IASB model, or strengths and weaknesses of each,” Linsmeier said. “But for me to be really effective in making convergence decisions, I need to know about the strengths and weaknesses of our model.”
The models proposed by FASB and the IASB both would require that expected credit losses be estimated based on past events, current conditions and forecasts for the future.
Under the FASB model, an entity would record its current estimate of expected losses every period. The IASB model would require recording of just a portion of the expected losses until significant credit deterioration has occurred. At that point, the full estimate of expected credit losses would be recognised under the IASB model.
—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.
