As a result of the credit crisis of 2008, many investors and financial statement users have questioned the need for improvements in the recognition and measurement of credit losses. This movement has helped pave the way for a multi-year accounting standard-setting project and a proposal that could bring sweeping changes to the accounting for impairment losses on financial instruments for entities of all sizes and in all industries.
In response to the criticisms of the current accounting model as well as convergence efforts, the FASB has proposed the establishment of a new impairment model that requires consideration of forward-looking information to assess the estimated cash flows to be received on amounts due from customers, investment securities and other financial instruments. This approach would apply to a wide range of financial assets that are subject to credit risk, including loans and loan commitments, debt securities, trade receivables, lease receivables, and reinsurance receivables. The far-reaching effects of these proposed changes have stirred debates among accountants and financial statement users, resulting in over 300 comment letters.
Mayer Hoffman McCann is monitoring progress on the FASB’s and IASB’s credit loss proposals. We have also provided input to the FASB in our comment letter.
If you have any specific questions, comments or concerns, please share them with Mike Loritz of MHM’s Professional Standards Group or your MHM service professional. You can reach Mike at email@example.com or 913-234-1226.