FASB makes narrow-scope amendments to its guidance on credit losses

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Nov 15, 2018

On November 15, 2018, the Fi­nan­cial Accounting Stan­dards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments — Credit Losses” which makes narrow-scope amendments to its guidance on credit losses

The ASU amends the transition requirements and scope of the credit losses standard issued in 2016.

Firstly, the ASU mitigates transition complexity by requiring entities other than public business entities—including not-for-profit organizations and certain employee benefit plans—to implement it for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. This aligns the implementation date for their annual financial statements with the implementation date for their interim financial statements.

Secondly, the ASU clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard.

Of note, the accounting for credit losses under US GAAP is different from that under IFRS 9. Following the completion of joint deliberations with the IASB in July 2012, the FASB decided to explore an alternative model in response to the feedback received from US constituents.

Re­view the press re­lease and the ASU on the FASB’s website.

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