This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Deloitte comments on FASB's proposed ASU on callable debt securities

Published on: Nov 28, 2016

Deloitte & Touche LLP comments on the FASB's proposed ASU Premium Amortization on Purchased Callable Debt Securities, which was issued in September 2016.

An excerpt from the comment letter is shown below:

We support the FASB’s proposal to amend the existing guidance on the application of the interest method to callable debt securities purchased at a premium. We believe that the proposed amendments represent a reasonable and practical short-term solution to the recognition of interest income on callable debt securities purchased at a premium.

Although we support the proposed ASU, the Board should consider adding a project that broadly addresses the application of the interest method to all interest-bearing financial assets and financial liabilities. The scope of such a project should include the measurement of interest income or expense on interest-bearing financial instruments that are recognized at fair value through earnings when an entity elects to separately report interest income or expense. The proposed ASU would require an investor to amortize premiums on purchased callable debt securities to the earliest call date, whereas under current U.S. GAAP, a debtor is generally required to amortize premiums or discounts on its issued debt securities over the contractual maturity. If the Board were to add a project to more fully address application of the interest method, it should consider whether this lack of consistency is aligned with the objectives, qualitative considerations, and concepts that guide the financial reporting of interest-bearing financial instruments. The Board may also consider how U.S. GAAP may be converged with international financial reporting standards.

We have significant concerns about the clarity of scope of the proposed amendments. Those concerns are discussed in the appendix below, which contains our responses to the proposed ASU’s questions for respondents.

For more information on the specific enhancements suggested by Deloitte & Touche LLP, see the full text of the comment letter which is available below.

Download

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.