FASB publishes Q&A Document on Estimating Credit Loss Reserves
Do you prepare any set of financial information or full set of financial statements based on the US GAAP?
You may be considering how to apply provisions of the Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which was issued in 2016.
You may find useful the newly published Q&A document from 10 January 2019 issued by the Financial Accounting Standards Board (FASB) staff. The Q&A addresses mainly the weighted average remaining maturity (WARM) method and discusses if and how to use it to comply with the standard.
The FASB staff agrees that the WARM method is one of many methods that could be used to estimate an allowance for the credit losses for less complex financial asset pools and within this document they present several specific examples on how to apply it.
The Q&A also lists steps that shall be followed and how to proceed if qualitative adjustment of historical data for reasonable and supportable forecast is needed to create the best estimate of the credit losses for the remaining balances that are to occur until the end of the contractual term for a defined pool of financial assets.
The above mentioned document with Q&A’s is accessible at FASB.org.
The article is part of dReport – January 2019, Accounting news.