NEWS RELEASE 07/21/10
FASB Issues Accounting Standards Update No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit LossesNorwalk, CT, July 21, 2010—The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (Update) No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The Update will improve transparency in financial reporting by public and nonpublic companies that hold financing receivables, which include loans, lease receivables, and other long-term receivables. The Update requires companies to provide more information in their disclosures about the credit quality of their financing receivables and the credit reserves held against them.
“The global financial crisis highlighted the need for additional information about a company’s financial instruments, including loans and other financing receivables,” stated FASB Chairman Robert H. Herz. “This Update provides greater transparency for investors and other users of financial statements by requiring more information from companies about credit risk exposures for financing receivables and the related credit reserves.”
The additional disclosures required for financing receivables include:
- Aging of past due receivables,
- Credit quality indicators, and
- Modifications of financing receivables.
Short-term accounts receivables, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from the Update.
For public companies, the amendments that require disclosures as of the end of a reporting period are effective for periods ending on or after December 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for periods beginning on or after December 15, 2010. For nonpublic companies, the amendments are effective for periods ending on or after December 15, 2011.
The Update is available at www.fasb.org.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.