Defining Issues | April 2019

FASB guidance includes recoveries & extension options under credit losses standard

KPMG reports on ASU 2019-04, which includes several amendments to the financial instruments standards. In particular, ASU 2019-04 changes how a company considers recoveries and extension options when estimating expected credit losses. 


ASU 2019-04

  • Companies that hold financial assets
  • Companies that apply hedge accounting

Relevant dates

Mandatory effective dates and early adoption provisions for the amendments to estimating expected credit losses.

  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 adoption allowed in annual and interim periods beginning after 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

The following amendments to estimating expected credit losses are likely to have the most significant effect.

  • The estimate of expected credit losses includes expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off
  • Contractual extensions or renewal options that are not unconditionally cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured

Report contents

  • Expected recoveries
  • Extension or renewal options

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