FASB issues targeted transition relief for the credit losses standard
Defining Issues | May 2019
ASU 2019-05 provides more flexibility in applying the fair value option on adoption of the new 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
- 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
Explore more
Resource
Handbook: Credit impairment
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