PwC examines FASB’s new impairment model for financial instruments

BVWireIssue #167-1
August 3, 2016

Not only financial services firms will be affected by the FASB’s standard that introduces a new impairment model for financial instruments. The broad scope of the new standard will affect other firms as well, according to an in-depth look at the model by PwC.

Expected loss model: Under Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326), financial statements will have to show credit losses on loans and other financial instruments in a more timely fashion. It replaces the current incurred loss model with an expected loss model, which will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost; (2) loan commitments and certain other off-balance-sheet credit exposures; (3) debt securities and other financial assets measured at fair value through other comprehensive income; and (4) beneficial interests in securitized financial assets.

The ASU is effective for U.S. SEC filers for fiscal years beginning after Dec. 15, 2019, and later for other entities.

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