Defining Issues | November 2019

FASB issues narrow-scope improvements to the credit losses standard

The FASB has issued ASU 2019-11, which includes several amendments to the credit losses standard. The ASU extends the recovery guidance to purchased financial assets with credit deterioration, which is likely to be of particular interest.


ASU 2019-11

  • Companies that hold financial assets in the scope of the credit losses standard

Relevant dates

Assuming that the credit losses standard has not been early adopted, these amendments apply at the same time.

Key impacts

  • The FASB previously decided to include the following in the estimate of expected credit losses: expected recoveries of financial assets previously written off, and expected recoveries of financial assets expected to be written off.
  • This ASU clarifies that the scope of the guidance related to expected recoveries extends to purchased financial assets with credit deterioration.
  • Expected recoveries cannot exceed the aggregate amount previously written off or expected to be written off.
  • When a method other than a discounted cash flow method is used to estimate expected credit losses, expected recoveries cannot include any amounts that result in an acceleration of the noncredit discount.
  • When estimating expected credit losses, an entity may include increases in expected cash flows after acquisition.

Related content

KPMG's Handbook: Credit Impairment



Subscribe to our newsletter

Receive timely updates on accounting and financial reporting topics from KPMG.