FASB proposes shortening amortization period for certain debt securities

By Ken Tysiac

FASB proposed an accounting standard Thursday that would shorten the amortization period for callable debt securities purchased at a premium.

The proposal would require the premium to be amortized to the earliest call date. The proposal would not require an accounting change for securities purchased at a discount; the discount would continue to be amortized to maturity.

The approach has been proposed to more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. The proposal would more closely align interest income recorded on bonds at a premium or a discount with the economics of the underlying instrument.

Under the proposal, an entity would apply the proposed amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. An entity would provide disclosures about a change in accounting principle in the period of adoption.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

SPONSORED REPORT

Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.