FASB tweaks financial instruments standards
The Financial Accounting Standards Board released an accounting standards update Thursday to clarify three of its recent standards for credit losses, hedging, and recognition and measurement of financial instruments.
The changes are mostly narrow in scope. The three standards were part of the financial instruments project in which FASB tried to converge its standards with the International Accounting Standards Board. FASB ended up splitting the financial instruments project into three separate standards, while the IASB kept them in a single standard known as IFRS 9, and it diverged from the IASB in some respects, particularly in its approach to accounting for credit losses. The latest changes are likely to pull the standards even further apart.
They involve a number of areas, including accrued interest, transfers between classifications or categories for loans and debt securities, and recoveries of financial assets and trade receivables that were previously written off. However, the changes also clarify various questions that stakeholders had brought to FASB’s attention.
“Since issuing the financial instruments standards, including credit losses and derivatives and hedging, the FASB staff has been working with stakeholders to obtain feedback and address questions on the guidance,” FASB Chairman Russell G. Golden said in a statement. “Through these interactions, the FASB identified areas of the guidance that require clarification and correction. The amendments in the ASU address those areas.”
The update is also part of an ongoing effort at FASB to improve its codification of accounting standards and fix any unintended applications of the rules.