Defining Issues   |   November 2018
 

FASB proposes clarifications for financial instruments

Filed under: Financial instruments

The FASB has proposed amendments related to classification and measurement, credit losses and hedging. The proposed ASU provides clarifications for financial instruments – classification and measurement (ASU 2016-01), credit losses (ASU 2016-13) and derivatives and hedging (ASU 2017-12).

Applicability

  • Companies that hold financial instruments in the scope of the credit losses standard
  • Companies that hold equity investments
  • Companies that apply hedge accounting

Relevant dates

  • November 19, 2018 – FASB issued proposed ASU
  • December 19, 2018 – Comments due on proposed ASU

Key impacts

  • The estimate of expected credit losses would include expected recoveries of financial assets previously written off.
  • Contractual extensions that are not unconditionally cancellable by the lender are considered when determining the contractual term.
  • If an entity applies the measurement alternative and a transaction price for a similar or identical security is observed, the equity security should be measured at fair value under Topic 820.  

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