In brief: FASB announces intent to further discuss key aspects of proposed impairment model for financial assets (No. 2012-27)
In brief
On July 18, the FASB and IASB (the boards) met to discuss the financial instruments project. At the conclusion of the meeting, the FASB announced its intent to continue discussions about several key aspects of the impairment model, as well as consider the results of recent outreach efforts, prior to moving forward with an exposure draft. The exposure draft is currently expected to be released in the fourth quarter of 2012. This In brief article highlights why the FASB plans to continue discussions and what it plans to do next.
What's new?
On July 18, 2012, the FASB and IASB (the boards) met to discuss the financial instruments project. At the conclusion of the meeting, the FASB announced its intent to continue discussions about several key aspects of the impairment model, as well as consider the results of recent outreach efforts, prior to moving forward with an exposure draft. The exposure draft is currently expected to be released in the fourth quarter of 2012.
For the past several months, the FASB and IASB have continued to refine their proposed impairment model for financial assets. At a high level, the boards have agreed on a model that evaluates financial assets for credit impairment under a “three bucket” approach. The level of certain reserves recorded would be expected to increase as credit deteriorates over time. See In brief 2011-52, Let's try again — the impairment model for financial assets refined, for more on the three bucket approach.
The FASB staff has conducted outreach with stakeholders, including preparers, users, regulators, and accounting firms, to discuss various aspects of the proposed model. As part of this process, the staff received feedback that certain key aspects of the model remain unclear. Stakeholders indicated that many of their questions might be best addressed through the issuance of additional application guidance.
What's next?
The FASB staff has developed application guidance that it intends to present to the FASB during the month of August. The FASB believes that evaluating this guidance and ensuring that constituent concerns are addressed are key steps that need to be taken prior to moving forward with an exposure draft.
In response to the FASB’s announcement, members of the IASB expressed concern over the potential impact the FASB’s activities could have on the progress made to date on this project.
Questions?
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the Financial Instruments team in the National Professional Services Group (1-973-236-7805).
Authored by:
Christopher Gerdau
Partner
Phone: 1-973-236-5010
Email: christopher.gerdau@us.pwc.com
Christopher Rickli
Senior Manager
Phone: 1-973-236-4576
Email: christopher.rickli@us.pwc.com
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