Project Update

Accounting for Financial Instruments—Credit Impairment—Joint Project of the FASB and IASB

Last updated on June 13, 2013. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process. Please refer to the main Accounting for Financial Instruments project page for additional information related to all aspects of the Accounting for Financial Instruments project.

*Due Process Documents
*Outreach Activities
Decisions Reached at the Last Meeting
Summary of Decisions Reached to Date
Board/Other Public Meeting Dates—Current
*Project Plan
Contact Information

*Due Process Documents


FASB Due Process Documents

On December 20, 2012, the Board issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (proposed Update). The comment period ends on May 31, 2013. The proposed Update contained some proposed guidance pertaining to accounting for credit losses.

Joint Due Process Documents

On January 31, 2011, the FASB and the IASB proposed a common solution for impairment accounting, Supplementary Document—Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities—Impairment. The comment period ended on April 1, 2011.

IASB Due Process Documents

The IASB issued an Exposure Draft, Financial Instruments: Expected Credit Losses, on March 7, 2013. The comment period ends on July 5, 2013.
The IASB issued an Exposure Draft, Amortised Cost and Impairment, on November 5, 2009. The comment period ended on June 30, 2010.


*Outreach Activities

Since the issuance of the December 2012 proposed Accounting Standards Update, the FASB staff has received feedback on the proposal from more than 60 investors and other users of financial statements employed by more than 40 firms through face-to-face meetings and teleconferences with individual investors and groups of investors. Read a summary of the investor feedback received on the proposed Accounting Standards Update.

Beginning in late April and continuing through early July 2012, the staff held outreach sessions with preparers, auditors, and regulators. The purpose of those outreach sessions was to understand (a) whether the model would be operable, auditable, and understandable and (b) whether the draft application guidance sufficiently clarified the principles in the model. Furthermore, the staff performed limited outreach with users and received unsolicited informal feedback from a variety of stakeholders. Please find a summary of feedback received through the staff’s outreach efforts below:

Decisions Reached at the Last Meeting

See minutes below.

Summary of Decisions Reached to Date (as of December 20, 2012) 

See proposed Accounting Standards Update, issued December 20, 2012.

Board/Other Public Meeting Dates—Current

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

March 28, 2013 Board Meeting—Decision about whether to extend the comment letter period of the proposed Update.
November 20, 2012 Board Meeting—Joint FASB/IASB discussion of the FASB’s Current Expected Credit Loss Model. The meeting was informational and no decisions were reached.
October 31, 2012 Board Meeting—Decisions about issues related to the current expected credit loss model including complexity and whether to proceed with drafting a proposed Accounting Standards Update for vote by written ballot.
October 10, 2012 Board Meeting—Decisions about modifications, reexposure, and transition
October 3, 2012 Board Meeting—Decisions about disclosures for the current expected credit loss model.
September 7, 2012 Board Meeting—Decisions about accounting for loans on nonaccrual status and accounting for the impairment of debt securities and assets measured at FV-OCI.
August 22, 2012 Board Meeting—Decisions about an alternative impairment model.
August 1, 2012 Board Meeting—Decisions about exploring an alternative expected loss model.
July 18, 2012 Joint Board Meeting—Decisions about the impairment of loan commitments and financial guarantees and disclosures for the impairment model.
May 21, 2012 Joint Board Meeting—Decisions about the application of the “three-bucket” model to lease receivables.
May 9, 2012 Board Meeting—Decisions about the “three-bucket” impairment model, including application of the model to modifications of debt instruments
April 18, 2012 Joint Board Meeting—Decisions about the measurement objective and the application of the “three-bucket” model to certain trade receivables
February 28, 2012 Joint Board Meeting—Decisions about the “three-bucket” impairment model, including whether financial assets that have been transferred to Bucket 2 or Bucket 3 could be subsequently transferred to Bucket 1 and the application of the model to trade receivables
January 27, 2012 Joint Board Meeting—Decisions about the application of the “three-bucket” impairment model to purchased financial assets with an explicit expectation of credit losses at acquisition
December 14–15, 2011 Joint Board Meeting—Decisions about the “three-bucket” impairment model, including the measurement of the allowance balance in Bucket 1, the principle for when recognition of lifetime losses is appropriate, the grouping of assets, the difference between Bucket 2 and Bucket 3, and the application of the model to loans and publicly traded debt instruments
October 20, 2011 Joint Board Meeting—Decisions about initial classification of financial assets into buckets in the “three-bucket approach” for impairment of financial assets
September 21, 2011 Joint Board Meeting—Decisions about initial classification of financial assets into buckets and transfers between buckets in the “three-bucket approach” for impairment of financial assets
July 20, 2011 Joint Board Meeting—Decisions about transfers between buckets in the “three-bucket approach” for impairment of financial assets. Decisions about the measurement of expected losses for Bucket 1.
June 15, 2011 Joint Board Meeting—Decisions about a “three-bucket” impairment model for financial assets
May 18, 2011 Joint Board Meeting—Decisions about the way forward on the impairment project considering the feedback received on the supplementary document.
April 14, 2011 Joint Board Meeting—Decisions about the definition of amortized cost, interest income recognition, discounting of expected losses, and non-accrual guidance
April 13, 2011 Joint Board Meeting—Outreach and comment letter summaries on the Joint Supplementary Document on– impairment accounting.
March 29, 2011 Joint Board Meeting—Decisions about the accounting for credit impairment on purchased debt instruments.
March 22, 2011 Joint Board Meeting—Decisions about the objective of expected loss measurement.
February 17, 2011 Joint Board Meeting—Decisions about the definition of write-off for financial assets
January 18, 2011 Joint Board Meeting—Decisions about the comment period for the joint supplemental document on credit impairment of financial assets
December 16, 2010 Joint Board Meeting—Decisions about the accounting for credit impairment of financial assets
December 8, 2010 Joint Board Meeting—Discussions about various methods of accounting for credit impairment of financial assets
November 17, 2010 Joint Board Meeting—Discussions about various methods of accounting for credit impairment of financial assets
November 10, 11, 12, 2010 Joint Board Meeting—Decision about credit impairment outlook period and discussions about timing of credit impairment recognition

*Project Plan


The impairment project began in 2008 with the IASB and FASB developing and ultimately issuing separate impairment models in 2009 and 2010 respectively.

The IASB made tentative decisions about impairment and issued an exposure document on amortized cost and impairment in November 2009. The comment period ended on June 30, 2010. The IASB model was an expected cash flow approach which resulted in an effective interest rate which integrated credit loss expectations.

Click here to access the IASB's financial instruments project website for more background information on the impairment project.

The FASB issued proposed credit impairment and interest income recognition guidance in its May 2010 exposure draft on financial instruments. The FASB model eliminated the “probable threshold” for impairment recognition in current U.S. GAAP. The FASB model was based on the recognition of full lifetime expected losses upon acquisition or origination of the financial asset. Please refer to the Due Process Documents section of this page to read the May 2010 proposed Update.

The FASB participated with the IASB in an Expert Advisory Panel (EAP) that advised the Boards on the operational issues surrounding the IASB’s Expected Cash Flow approach and the FASB’s approach for determining credit impairments.

The document below provides a summary of the discussions of the EAP on the pertinent aspects of the proposed FASB credit impairment model to inform the FASB and its constituents. This paper does not contain the detailed minutes of the EAP or its final recommendations to the Boards.

Summary of EAP Discussions (as of July 2010) 

The FASB and IASB began joint redeliberations on credit impairment and interest income recognition models in November 2010. On January 31, 2011, the FASB and the IASB proposed a common solution for impairment accounting and issued a document for comment entitled, Supplementary Document –Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities—Impairment. The comment period ended on April 1, 2011. The FASB and IASB considered feedback received on the Supplementary Document as they continued joint redeliberations on the credit impairment accounting model.

In response to the feedback from the Supplementary Document, the Boards began to pursue an approach that would reflect the deterioration in the credit quality of financial assets. This approach would involve three categories of assets (i.e., a “three-bucket” approach). Similar to the approach set forth in the Supplementary Document, recognition and measurement of credit impairment losses would be based on expected losses.

After spending a considerable amount of time and effort developing the three-bucket approach, the FASB decided not to pursue an Exposure Draft on the three-bucket approach given the feedback the FASB had received on the approach.  Therefore, the FASB decided to modify its proposal in response to the concerns raised by constituents.  As a result, on December 20, 2012, the Board issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (proposed Update). The comment period ended on May 31, 2013.

The FASB will consider the comments received on its proposal as well as the comments received by the IASB on its proposal, which was issued on March 15, 2013.  The IASB's comment period ends on July 5, 2013.

Contact Information

Steve Kane
Practice Fellow
smkane@fasb.org

Stephen McKinney
Practice Fellow
scmckinney@fasb.org

David M. Shaw
XBRL Assistant Project Manager
dmshaw@fasb.org

Anna Rose
XBRL Project Research Associate
arose@fasb.org

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