FAQs about FASB’s ASU on modified receivables

ASU 2022-02 eliminates the requirement for creditors to recognize and measure certain modifications of receivables as troubled debt restructurings, and enhances disclosures about certain modifications of receivables. KPMG answers implementation questions about the new ASU. 

Applicability

• Entities that have adopted the credit impairment standard (ASC 326)

Relevant dates

ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

• ASC 326 not yet adopted: Adopt this ASU at the same time as ASC 326.
• ASC 326 already adopted: Early adoption is permitted. An entity can early adopt the guidance for modified receivables in any interim period, but it must apply all of the ASU’s guidance for modified receivables as of the beginning of the fiscal year that includes the interim period.

Key impacts

In this Hot Topic, we provide our views on:

• How expected credit losses are estimated after adoption for receivables that were modified in a TDR before adoption
  
• The impact of early adopting the ASU in an interim period other than the first interim period of a fiscal year
  
• Meeting the requirements for enhanced disclosures about certain receivable modifications, including what modifications and defaults are subject to each disclosure
• New in this edition: We answer questions encountered in practice about whether lease receivable modifications are in scope of the enhanced disclosures