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.
Please let us know
if you have any comments about this article or enhancements you would like to see.