Financial instruments — Impairment

Date recorded:

At its July 2012 meeting, the IASB substantially completed deliberations of a “three bucket” impairment model for financial assets.

During this meeting, the IASB staff noted that it had conducted extensive outreach over the summer months to understand constituent views about the “three bucket” impairment model. While the IASB staff intends to present this feedback at the October 2012 Board meeting, the staff provided high-level observations of its feedback at this meeting.

Feedback suggested that more clarity should be provided regarding when financial assets should move from Bucket 1 to Buckets 2 or 3 under the “three bucket” impairment model. However, the staff also heard support for not pursuing a model where you recognise lifetime expected losses on initial recognition of financial assets. Instead, it was important that the impairment model distinguish deterioration in financial asset quality; thereby suggesting that constituents were not supportive of a model which applies the concept of expected losses in a single measurement approach (more akin to a model which the FASB is currently considering).

Hearing this feedback, many IASB members wanted to discuss specifics of the model the FASB is considering. The FASB staff, who attended this meeting, noted they would be sharing the specifics of the FASB’s tentative model in October, and as such, preferred to not discuss specifics of that model at this time. The IASB was not asked to make any tentative decisions as a result of the high-level feedback provided.

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