The Financial Accounting Standards Board issued a proposed
The proposed update addresses areas identified by FASB as part of its post-implementation review process, which assesses whether a standard is achieving its goals by offering relevant information to investors. Since issuing its credit losses standard, which introduced the current expected credit losses, or CECL, model in 2016, FASB has provided various resources to help implement the standard. That includes forming a Credit Losses Transition Resource Group (TRG), doing outreach with stakeholders of different types, creating educational materials and staff question-and-answer guidance, leading educational workshops, and performing archival review of financial reports.
During FASB’s post-implementation review of the CECL standard, including a roundtable this past May, investors and other stakeholders questioned the relevance of the troubled debt restructuring (TDR) designation and the decision usefulness of disclosures about those modifications. Some observers pointed out that the measurement of expected losses under the CECL model already includes the forward-looking aspects of the TDR model and that relevant information for investors would be better conveyed through improved disclosures about certain modifications.
The amendments in the proposed standards update would eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty.
FASB also heard feedback that an illustrative example showing how a public business entity could meet the disclosure requirement to present financing receivable information by year of origination (commonly referred to as the “vintage disclosures”), includes a line item for gross write-offs and gross recoveries for each origination year. Some stakeholders said it was unclear whether gross write-offs and recoveries need to be presented in the vintage disclosures because that information isn’t listed as a specific disclosure requirement. In addition, the disclosure of gross write-offs was cited by a number of investors as an essential input to their analysis.
In response to this feedback, the amendments in the proposed ASU would require that a public business entity disclose current-period gross write-offs according to the year of origination for financing receivables and net investment in leases.
FASB is asking for feedback on the
