Dataline: FASB Proposes Changes to Financial Instruments Accounting (No. 2010-25)

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On May 26, 2010, the FASB released its proposed changes to financial instruments accounting for public comment. Comments are due by September 30, 2010. Under the proposal, most financial instruments (including loans held by banks and held-to-maturity securities) would be measured at fair value with changes in fair value recognized in net income, unless an instrument qualifies and an entity elects to recognize the changes in fair value in other comprehensive income. Major changes to impairment and hedge accounting are also being proposed. The FASB plans to issue a final standard in the first half of 2011. No effective date has been proposed, but the changes are unlikely to be effective before 2013. The FASB and IASB are jointly reconsidering the accounting for all financial instruments, including impairment and hedge accounting. The objective of this joint project is to improve the decision usefulness of financial statements for users by simplifying and harmonizing the accounting for financial instruments. Despite being a joint project, however, the FASB and IASB so far have reached fundamentally different conclusions. This Dataline provides an overview of the key provisions of the FASB’s proposal, includes a comparison to the IASB's decisions, and provides PwC's insights on selected matters.