Potential impact of Q1 economic events on expected credit losses under ASC 326
Economic disruption has resulted in Q1 2020 from the coronavirus and an oil pricing dispute. KPMG explains the effects of the disruption on expected credit losses when a company adopts the new credit loss standard.
Companies adopting the credit losses standard
- ASC 326 is effective on January 1, 2020 for public business entities that are not eligible to be smaller reporting companies and that have a calendar year-end, with early adoption available for other companies.
- Economic disruption has resulted from reactions to the novel coronavirus (COVID-19) and a price dispute among two of the world’s three largest oil producers.
- We believe that the economic disruption resulting from COVID-19 and the decline in oil prices during the first quarter should not be reflected in a company’s estimate of credit losses under ASC 326 as of January 1, 2020 (i.e. its ‘transition adjustment’).
- Background and impacts on expected credit losses
Hot Topic: SEC provides regulatory relief to companies impacted by coronavirus
Hot Topic: Potential impacts of coronavirus on SEC issuers
Handbook: Credit impairment
Spotlight on contributors