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Journal entry — FASB and IASB discuss next steps for project on impairment of financial assets

Published on: May 18, 2011

At today’s joint board meeting on the impairment of financial assets, the FASB and IASB decided to form a working group of board members and staff tasked with further developing and refining a variation of the proposals in the supplementary document on the basis of feedback received from constituents. The boards reached this decision after discussing various alternatives for how to proceed with the impairment project, including finalizing the model proposed in the supplementary document or revising the current incurred loss models in existing literature.

The working group will make suggestions to the boards regarding recognition baseline alternatives and other aspects of the impairment model. One such alternative that was discussed at the meeting is a component approach in which the impairment allowance would comprise (1) a “bad book” amount, (2) a time-proportionate amount, and (3) a minimum floor amount (this alternative would be in place of the “good book’s” higher-of calculation proposed in the supplementary document). The suggestions of the working group are expected to be ready no earlier than late June. No other decisions on the impairment of financial assets were made at this time.

For more information about the supplementary document’s proposals, see Deloitte’s February 8, 2011, Heads Up.

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