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Handbook: Credit impairment

Handbooks | January 2023

Latest edition: Our updated guide to CECL, with Q&As, interpretive guidance and examples.

In-depth guidance on, and interpretation of, ASC 326. This latest edition includes guidance on ASU 2022-02 (troubled debt restructurings and vintage disclosures), with new interpretations and examples based on experience with companies implementing ASC 326.


  • Companies that hold financial instruments in the scope of the credit losses standard

Relevant dates

The FASB has issued guidance deferring the effective dates for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and other private companies, including not-for-profits and employee benefit plans.
 ASU 2016-13 (and related amendments)ASU 2022-02

SEC filers that are not eligible to be smaller reporting companies

Annual and interim periods in fiscal years beginning after Dec 15, 2019

Annual and interim periods in fiscal years beginning after Dec 15, 20221

All other entities, including not-for-profits and employee benefit plans

Annual and interim periods in fiscal years beginning after Dec 15, 20221

Early adoption permitted?

Permitted as of the beginning of the fiscal year  

Permitted for an entity that has adopted ASU 2016-13 as of the beginning of the fiscal year

Entities that have not previously adopted ASU 2016-13 will adopt ASU 2022-02 at the same time that they adopt ASU 2016-13.

Key impacts

  • In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, the culmination of a project that began in the wake of the global financial crisis. This standard has marked a significant change – requiring the immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets.
  • The accounting change has been particularly impactful to institutions with significant lending activities or investments in debt securities. But amid all the change, the standard is also flexible, allowing companies to formulate their own approaches and to leverage many existing practices.
  • Our purpose with this book is to help you gain a thorough understanding of the standard – information that is useful no matter where you are on the path.
  • We intend to continue the dialogue – updating our guidance to provide our insights on issues that arise. 

Report Contents

ASC 326-20

  • Scope
  • Recognition of expected credit losses, writeoffs and recoveries
  • Methods to estimate expected credit losses and collective assessment
  • Contractual term
  • Historical loss experience, forecasts and reversion
  • No allowance for credit losses
  • Credit enhancements and practical expedients
  • Troubled debt restructurings
  • Purchased financial assets with credit deterioration
  • Business combinations and asset acquisitions
  • Off-balance sheet credit exposures
  • Guarantees
  • Other investments in equity method investees
  • Net investment in leases
  • Specific considerations for insurance entities, commercial entities and trade receivables
  • Illustrative example

ASC 326-30

  • Targeted changes for available-for-sale debt securities

Relevant to ASC 326-20 and 326-30

  • Beneficial interests
  • Subsequent events
  • Income taxes
  • Presentation, disclosure, effective date and transition

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Credit impairment

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Meet our team

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Mark Northan
Partner, Dept. of Professional Practice, KPMG US
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Danielle Imperiale
Managing Director, Dept. of Professional Practice, KPMG US

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