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Heads Up on impairment of financial instruments

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21 Jan 2010

The latest Heads Up mewsletter from Deloitte United States examines decisions that the FASB recently made on how entities should recognise and measure credit impairments and interest income under its proposed new model for accounting for financial instruments.

The proposed new model would affect the accounting for credit losses associated with loans and debt securities. The FASB's deliberations are part of its joint efforts with the IASB to simplify and improve the accounting for financial instruments. As was reported in the 10 November 2009 Heads Up (PDF 172k), the IASB has issued an exposure draft amortised cost and impairment that proposes radical changes to the manner in which entities recognise and measure credit impairment. Under the IASB's proposal, entities would use an 'expected-loss' approach based on their estimates of expected cash flows over the life of financial assets. The FASB is contemplating less significant changes to existing accounting requirements and plans to expose its proposed new model for comments by the end of this quarter.

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