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Boards clarify the solely principal and interest condition

  • FASB-IASB Image

Sep 20, 2013

The FASB and IASB held joint meetings on September 17 and 18, 2013, to discuss several of the boards' joint projects. In their session on classification and measurement, the boards discussed clarifications and improvements to the solely principal and interest (P&I) condition.

Specifically, the boards:

  • Made a tentative decision that "principal" should be defined as "the amount transferred by the holder for the financial asset on initial recognition."
  • Clarified and emphasized definitions related to “interest” when applying the solely P&I condition, including the meaning of “time value of money” when applying regulated interest rates.
  • Discussed and made tentative decisions related to the application of the solely P&I condition to financial assets with contingent features, as well as to assets with prepayment and extension features.

For a detailed summary of the discussion, see the meeting minutes on the FASB Web site or the preliminary and unofficial notes taken by Deloitte observers at the meeting, available on IAS Plus.

Correction list for hyphenation

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