FASB addresses troubled debt, vintage disclosures in CECL standard

By Ken Tysiac

FASB modified its credit losses standard Thursday, eliminating the accounting guidance for troubled debt restructuring by creditors and enhancing disclosure requirements for vintage disclosures.

During FASB's post-implementation review of the credit loss standard, investors and other stakeholders questioned the relevance of the troubled debt restructuring designation and the decision usefulness of disclosures.

Some noted that measurement of expected losses under the current expected credit loss (CECL) model already incorporates losses realized from troubled debt restructuring and that relevant information for investors would be better conveyed through enhanced disclosures about certain modifications.

The new Accounting Standards Update eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted CECL while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty.

Meanwhile, the disclosure of gross writeoff information by year or origination was cited by numerous investors as an essential input to their analysis. To address this feedback, the new ASU requires that a public business entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases.

"The new ASU responds to feedback we received from investors and other stakeholders during our extensive post-implementation review of the credit losses standard," FASB Chair Richard Jones said in a news release. "The amendments create a single model for loan modification accounting by creditors while providing improved loan modification and writeoff disclosures."

— To comment on this article or to suggest an idea for another article, contact Ken Tysiac at Kenneth.Tysiac@aicpa-cima.com.

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