FASB issues guidance on interest recognition for investments in callable debt securities
Mar 31, 2017
The FASB has issued Accounting Standards Update (ASU) No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities,” which is intended to enhance “the accounting for the amortization of premiums for purchased callable debt securities.”
Specifically, the ASU shortens the amortization period for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. The ASU is being issued in response to concerns from stakeholders that “too much interest income [is being recognized] before a borrower calls the debt security, followed by the recognition of a loss on the call date.”
The ASU’s amendments are effective for public business entities for interim and annual periods beginning after December 15, 2018. For other entities, the amendments are effective for annual periods beginning after December 15, 2019, and interim periods thereafter. Early adoption is permitted.
For more information, see the ASU on the FASB’s Web site.