Defining Issues | May 2019

FASB issues targeted transition relief for the credit losses standard

FASB has issued ASU 2019-05, which provides entities with more flexibility in applying the fair value option on adoption of the credit impairment standard.

Applicability

ASU 2019-05

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

Relevant dates

  Credit losses standard adopted?
Effective date: Yes No
Annual periods and interim periods – Fiscal years beginning after December 15, 2019 The effective dates and transition requirements are the same as the credit losses standard
Early adopted allowed? Yes, in any interim period if the company has adopted the credit losses standard The effective dates and transition requirements are the same as the credit losses standard

 

Key impacts

  • On adoption, an entity is allowed to irrevocably elect the fair value option on an instrument-by-instrument basis 
  • This alternative is available for all instruments in the scope of Subtopic 326-20 except for existing held-to-maturity debt securities 
  • If an entity elects the fair value option, the difference between the instrument’s fair value and carrying amount is recognized as a cumulative-effect adjustment  

Related content

KPMG’s Handbook: Credit impairment

 

 

 

Subscribe to our newsletter

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

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

Featured topics