FASB Issues Accounting Standards Update to Improve Financial Reporting about Troubled Debt Restructurings

Norwalk, CT, April 5, 2011—The Financial Accounting Standards Board (FASB) today issued Accounting Standards Update (Update) No. 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The Update will improve financial reporting by creating greater consistency in the way GAAP is applied for various types of debt restructurings.

The Update clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings.

“The increase in loan modifications caused by the recent economic downturn led investors, regulators, and practitioners to ask the Board to clarify what types of modifications should be considered troubled debt restructurings for accounting and disclosure purposes,” states FASB Chairman Leslie F. Seidman. “This Update provides that guidance, resulting in greater consistency and transparency in the reporting of these transactions.”

For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. For nonpublic entities, the amendments in the Update are effective for annual periods ending on or after December 15, 2012, including interim periods within that annual period. Early application is permitted.

The Update is available at

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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