Financial instruments

Public companies have adopted the FASB's recognition and measurement guidance and private companies are adopting throughout 2018. All are evaluating the FASB's credit losses guidance to be ready for the effective date of January 1, 2020. Explore PwC's latest thinking on not just these projects, but all financial instruments.

Quick update on what is changing

  • Companies face major changes in financial reporting as they move to implement FASB's current expected credit loss model (CECL), which carries a Q1 2020 effective date for most public companies, and additional time for other entities.

- For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies will be required to use the new current expected credit loss (CECL) approach that will generally result in earlier recognition of allowances for losses.

- For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

  • The guidance is effective as follows:

- Q1 2020 for calendar year-end public business entities that are SEC filers

- Q1 2021 for calendar year-end public business entities that are not SEC filers

- 2021 for calendar year-end nonpublic entities

Early application of the guidance is permitted in 2019 for calendar year-end entities.

  • The FASB's guidance on recognition and measurement contained in ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, requires entities to measure equity investments at fair value that are not accounted for under the equity method and do not result in consolidation. Changes in fair value are recognized in income unless the investments qualify for the practicability exception.
  • The guidance was effective in Q1 2018 for calendar year-end public entities. Calendar year-end nonpublic entities have an additional year. Certain provisions can be early adopted.
  • In February 2018, in response to questions raised by stakeholders, the FASB issued technical corrections and improvements to the new guidance, including an option to un-elect the measurement alternative, amendments to the transition provisions, and clarifications to presentation and other areas.
    • The amendments are effective in Q3 2018 for public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018. The amendments are effective upon adoption of ASU 2016-01 for all other companies.

Watch our video on the new current expected credit loss (CECL) guidance

The current expected credit loss guidance, or "CECL," will have a wide variety of impacts. One such impact relates to the accounting for guarantees that are not within the scope of another standard; for example, guarantees that are accounted for as derivatives. This video discusses requirements for guarantees under the new CECL standard and how it will require an additional credit loss estimate to be recognized for the lifetime expectation of credit loss payments to be made under the guarantee.


Playback of this video is not currently available

Contact us

Heather Horn
US Strategic Thought Leader, National Professional Services Group, PwC US

David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group, PwC US

Follow us