Handbook: Credit impairment
Handbooks | May 2024
Latest edition: Our updated guide to the accounting, presentation and disclosures of CECL.
Using Q&As and examples, our in-depth guide explains the accounting under ASC 326. This May 2024 edition adds new interpretations and examples based on experience with companies applying ASC 326.
Applicability
- Companies that hold financial instruments in the scope of the credit losses standard
Relevant dates
- Effective immediately
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.
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
- 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
ASC 326-30
- Available-for-sale debt securities
Relevant to ASC 326-20 and 326-30
- Beneficial interests
- Subsequent events
- Presentation and disclosure
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