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A publication of the Professional Standards Group

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• The scope of the CECL model; • The measurement of expected credit losses;• Collateral-based practical expedients; • Modifications to impairment guidance in Topic 320

for debt securities; • Accounting for purchased financial assets with

credit deterioration;• Accounting for troubled debt restructuring by

creditors;• Incorporated a fair value floor in the credit loss

model for available-for-sale debt securities;• Application of other components in the available-

for-sale credit loss model;• Loan commitments;• Nonaccural of interest income;• Write-off guidance;• Loans subsequently identified for sale;• Certain beneficial interests;• Disclosures;• Transition and transition disclosures; and• Effective date and early application.

The standard is moving forward, but the FASB has acknowledged that transition and implementation of the standard may also be a challenge. To help make the transition easier, the FASB created a credit loss TRG. The purpose of the credit loss TRG is to focus on the decisions that were made by the FASB in the new standard and whether the draft of the new standard reflects those decisions in a manner that can implemented. The idea came from the success the FASB noted with the transition resource group created for revenue recognition, which has identified

The Financial Accounting Standards Board (FASB) recently created a transition resource group (TRG) to assist with implementing a piece of its financial instruments project.

Final changes to Accounting for Financial Instruments: Credit Impairment are due in the second quarter of 2016. Drafting the final accounting standards update for credit impairment proved difficult. The initial exposure draft of changes was released in 2012, and the draft underwent many deliberations. Investors and preparers disagreed about several elements of the proposed changes to the current expected credit losses (CECL) model, with investors pushing for accounting that shows all expected credit losses and preparers advocating for an approach that permits recognition of credit beyond a threshold. Initial comments led to a second exposure draft and further deliberations.

Discussions on the proposed changes to the CECL model are finally coming to a close. In the time since the release of the initial proposed ASU, the FASB has reached several tentative decisions regarding the standard, including:

April 2016

Transition Resource Group Formed for Forthcoming Credit Impairment Standard

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation. Please contact your MHM auditor to further discuss the impact on your audit or audit report.

several small scope changes that needed to be made to clarify how to transition to and implement the guidance in ASU 2014-09.

The credit loss TRG is operating a little differently than the group created for revenue recognition. The FASB felt that if it had the involvement of the members of the credit loss TRG before the issuance of the final standard, it would issue a better standard and have less need to provide any implementation guidance post-issuance.

The credit loss transition resource group, which includes financial statement preparers, auditors, users and other financial services regulators, met for the first time publicly on April 1, 2016, to discuss measurement guidance in the proposed standard.

Once the credit loss impairment final standard is issued, the credit loss TRG will take requests on potential implementation issues for further discussion. Guidance on how to submit requests will be listed on the TRG’s web page.

If you have specific comments, questions or concerns, please contact Christine McAlarney of MHM’s Professional Standards Group. Christine can be reached at cmcalarney@cbiz.com or 727.572.1400.