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.
Applicability
- 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
Related content
- KPMG's Handbook: Credit Losses
- KPMG's Handbook: Hedging
- KPMG's Q&A: Recognition and measurement
- Proposed amendments: web article
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