The changes being contemplated by the two boards suggest that entities will soon need to prepare for radical changes to the manner in which they account for a wide range of financial instruments, including investments in debt and equity securities, loans, trade receivables, trade payables, interests in hybrid financial contracts, and an entity's own issued debt. While the changes will have the biggest impact for heavy users of financial instruments, such as banks, insurance companies, and other entities in the financial services industry, virtually no industry will be untouched. The changes affect how entities recognise, classify, and measure financial assets and financial liabilities; how they recognise and measure impairment of loans, receivables, and other financial assets; and how they apply hedge accounting to their derivative and hedging activities.
Currently, the two boards' approaches differ in important respects. For instance, the FASB's proposed approach calls for more fair value measurements than both current US GAAP and IFRSs, whereas the IASB's proposed approach retains a mixed-measurement attribute model that is more similar to current US GAAP and IFRSs, but prescribes different criteria for amortised cost measurements. In addition, the two boards' approaches to recognising and measuring credit losses differ.