FASB Chairman Leslie Seidman said Tuesday via webcast that FASB and the International Accounting Standards Board (IASB) have reached a compromise on a single approach to impairment for financial instruments. She acknowledged, however, that substantial constituent feedback on the boards’ joint proposals for revenue recognition and leases reveals several major issues the boards will need to deal with in the next few months.
The financial instruments impairment compromise, which Seidman said will be released “in the next week or so,” combines key features of the boards’ separate proposals.
Creditors would not be prevented from evaluating losses on a pool or portfolio basis.
To reassess the expected credit loss each period and to recognize immediately the effects of any changes in credit loss expectations.
On the issue of classification and measurement of financial instruments, Seidman said FASB received “overwhelming feedback” that preparers, auditors and others would prefer to have loans held for collection recorded on the balance sheet at amortized cost with a more robust impairment test.
This limited cost approach aligns more closely with the IASB’s model in IFRS 9 and recommendations made by the AICPA’s Accounting Standards Executive Committee (AcSEC), now known as the Financial Reporting Executive Committee (FinREC).
Seidman said FASB has unanimously agreed that at least some assets should qualify for cost accounting and has started its discussion on which ones might qualify.
On its revenue recognition proposal, she said FASB received almost 1,000 comment letters, with most of them supporting the goal of a single standard. But she said many also expressed concern about the way the proposal articulates the underlying principle (see “ AICPA: Revenue Recognition Proposal Impractical ”).
Regarding lease accounting, she said FASB received approximately 750 letters, with many expressing concern that lessor accounting is not broken (see “ AICPA: Lease Proposal Fails to Address Application Issues ”).
She said projects dealing with a new standard on the Statement of Comprehensive Income and Fair Value Measurement are on schedule to be finalized by the end of the first quarter.
Seidman also briefly addressed a number of other issues including the work of the blue-ribbon panel (BRP) on private company reporting, implementation dates for new standards and the Financial Accounting Foundation’s (FAF) plan to conduct post-implementation reviews to ensure the standards are being applied as intended. FAF is FASB’s parent organization.
On implementation dates, she said constituents support a single implementation date for all new standards rather than a staggered approach.
—Matthew G. Lamoreaux ( mlamoreaux@aicpa.org ) is a JofA senior editor.