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First meeting of the FASB TRG for credit losses

  • FASB meeting (lt blue) Image

05 Apr 2016

The US Financial Accounting Standards Board (FASB) has set up a transition resource group (TRG) for credit losses to seek and provide feedback on potential issues related to the implementation of the FASB’s upcoming standard on the accounting for credit losses. The TRG held its first public meeting on 1 April 2016. Although there are differences between the FASB’s intended approach and IFRS 9 (2014) there are sufficient similarities between the current expected credit loss (CECL) models to make the discussions of the group interesting to IFRS preparers as well.

The TRG on credit losses acts in a manner similar to the joint TRG that the FASB and IASB established to discuss the recently issued revenue recognition standards. However, unlike the revenue recognition TRG, the FASB established the credit losses TRG before the issuance of the final standard on credit losses to understand whether the guidance is understandable and to avoid potential implementation issues. The FASB will consider the feedback received from the credit losses TRG before finalising the guidance on credit losses (currently expected in Q2 2016).

The first discussions included the TRG’s observations on how an entity would estimate expected credit losses on loans, specifically relating to the draft measurement guidance that states an entity:

  • may use various methodologies to determine their expectation of credit losses;
  • will not be required to forecast conditions over the entire life of a financial asset;
  • has flexibility when determining the historical loss information to which it would revert and the method of reversion;
  • should incorporate information in its expectations of credit losses that are relevant to the entity and accessible without undue cost or effort and would exclude external information that is less relevant than an entity’s own internal information.

Deloitte observers have taken notes at the meeting; these are available as a TRG Snapshot. Additional information is available on the FASB website:

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