Financial Instruments

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The new proposed financial instruments standards will have a significant impact on financial institutions. The extent of the effect will depend upon the relative significance of financial instruments to an entity’s operations and financial position as well as the entity’s business strategy.

Accounting for Financial Instruments Standards 

The Financial Accounting Standards Board organized its efforts on financial instruments into three separate standards. Two of these standards have been released while the third is expected later this year.

  1. ASU 2016-01—Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
  2. ASU No. 2016-13— Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments 
  3. Hedging (exposure draft expected to be issued in Q3 2016)

Learn more about the financial instruments standards.

IASB Financial Instruments Standard

In July 2014, the International Accounting Standards Board (IASB) published the final version of IFRS 9 Financial Instruments. This began as a joint project with the FASB, however, as it relates to accounting for impairment, the two Boards did not reach convergence.

IFRS 9 requires an impairment allowance against the amortized cost of financial assets held at amortized cost or FVOCI. The change in this allowance is reported in profit and loss. For most assets, under IFRS 9, impairment is measured as the present value of credit losses from default events projected over the next 12 months. In contrast, the new CECL model measures impairment over the expected life of the asset.

AICPA TV 

Salome Tinker, AICPA Senior Technical Manager - Accounting Standards Team, provides a brief overview of the FASB’s credit impairment standard.

More on AICPA TV

News & Views 

FASB proposed targeted changes to hedge accounting rules, Journal of Accountancy, September 8, 2016

New credit loss standard manageable for US banks, Fitch says, Journal of Accountancy, July 25, 2016

5 tips for implementing FASB's credit loss standard, Journal of Accountancy, July 12, 2016

New FASB standard requires earlier reporting of credit losses
, Journal of Accountancy, June 16, 2016 

How expected credit loss standards will challenge auditors, Journal of Accountancy, March 3, 2016

AICPA Webcasts and CPE Courses 

 

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