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FASB staff issues Q&A on expected credit losses on financial assets

The US Financial Accounting Standards Board (FASB) staff has issued a second question-and-answer (Q&A) document that addresses more than a dozen frequently asked  questions related to Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

The Q&A document covers areas that include:

  • use of historical loss information
  • making reasonable and supportable forecasts, and
  • the reversion to historical loss information.

Issued in 2016, the current expected credit losses standard (CECL) requires US organizations to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Its objective is to provide financial statement users with an estimate of the net amount the organization expects to collect on those assets. The standard does not require a specific credit loss method; rather, it allows organizations to use judgment to determine the relevant information and estimation methods appropriate for their circumstances.
 
Additionally, FASB is planning a series of CECL educational workshops to be held around the US.

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