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CFA Institute issues results of a credit loss and impairment survey

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Oct 04, 2013

The CFA Institute, a U.S.-based association of investment professionals with international membership, has published the results of its "Credit Loss and Impairment Survey," showing that investment professionals are divided on the best method for reporting credit losses and impairment.

In December 2012, the FASB published its proposed model on current expected credit losses, which was followed by the IASB's expected losses impairment model in March 2013. Despite global calls for a converged standard, the FASB model calls for more up-front recognition of expected credit losses than the IASB model.

In order to back its comment letter to the IASB and the FASB, the CFA Institute conducted a survey of its membership to ascertain investor preferences related to financial reporting for credit losses. More than 300 of its members responded to the survey. The key findings were:

  • Respondents were almost evenly split on which proposed model they preferred (47 percent preferred the IASB's model, 44 percent backed the FASB's model).
  • Respondents from the Americas preferred the FASB's proposed model (53 percent) to the IASB's model (41 percent), while the IASB's proposed model was preferred by Asia-Pacific respondents (49 percent to 42 percent) and Europe, Middle East and Africa participants (50 percent to 40 percent).
  • Respondents supported fair value as a measurement method that is most decision-useful for measuring credit losses slightly more than an expected-loss model (46 percent to 41 percent). The current incurred-loss approach was supported by just 5 percent of respondents.
  • Despite a lack of agreement regarding which model to use, 92 percent said the FASB and the IASB should arrive at a converged method of estimating credit losses.

Respondents also commented on which disclosures related to impairments of financial assets they felt were needed.

Please click for the following documents on the CFA Institute's Web site:

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