Impairment of Financial Instruments — FASB Discusses the Scope of Its Alternative Impairment Model

Published on: 20 Sep 2012

This week, the FASB continued deliberating the current expected credit loss (CECL) model, its proposed impairment model for financial assets.

The Board discussed the scope of the CECL model and unanimously agreed that the model should apply to the following financial instruments:

  • Trade receivables.
  • Lease receivables.
  • Loan commitments that are not measured at fair value through net income (FV-NI).
  • Financial guarantees that are not measured at FV-NI and not accounted for as an insurance contract.1

Editor’s Note: For more information about the FASB’s decisions on its alternative impairment model, see Deloitte’s August 24, 2012, and September 10, 2012, journal entries.

The FASB staff noted at the Board meeting that it would develop application guidance to help preparers apply the CECL model to the abovementioned financial instruments.


1 The Board agreed that the CECL model should apply to all financial guarantees that are not accounted for at FV-NI and that ultimately do not fall within the scope of its forthcoming final standard on insurance contracts.

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