Classification and measurement of financial instruments — FASB decides to retain separate accounting models for loans and debt securities

Published on: 12 Mar 2014

 At its meeting today, the FASB discussed whether to develop a single classification and measurement business model for both loans and investments in debt securities or to retain the separate accounting guidance under U.S. GAAP for classifying and measuring investments in debt securities and loans.

The Board voted (1) to retain the existing guidance in U.S. GAAP on classifying and measuring investments in debt securities and loans and (2) to require investments in equity securities to be measured at fair value through net income. The Board will discuss at a future meeting whether to carry forward the guidance in its February 14, 2013, proposed ASU1  that provides a practicability exception for nonmarketable equity securities.

The Board also directed the staff to research whether the definition of “security” in ASC 3202 should be revised. During targeted outreach, stakeholders expressed concerns that the definition is based on a definition of the term that existed under a version of the uniform commercial code that was amended after the FASB’s issuance of Statement 115.3 The FASB will consider the results of the staff’s analysis at a future meeting.

Some Board members also expressed concerns about the proposed ASU’s lack of a fair value through other comprehensive income (FV-OCI) classification category for loans held by insurance entities and discussed whether to provide a conditional option to elect FV-OCI for loans. The Board plans to address this matter after it makes a decision in its insurance project regarding the measurement of an insurance obligation.


1  FASB Proposed Accounting Standards Update, Recognition and Measurement of Financial Assets and Financial Liabilities.

2  FASB Accounting Standards Codification Topic 320, Investments — Debt and Equity Securities.

3  FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities (superseded).

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