In July 2019 FASB staff prepared and published a useful document that should help companies clarify questions related to the application of provisions from Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
The published document gives responses to 16 questions on application of the above mentioned standard and may be very helpful to accounting specialists preparing analysis in accordance with it.
The questions relate mainly to the following topics:
- Application of forecasted information
- Use of historical information vs. forecast information
- What sources of information are required to be used
- Use of external vs. internal data
- Length of the forecast period
Also note that earlier in the year, the FASB staff issued a set of Q&As related to the very same standard concerning the method applied to estimate expected credit losses: Whether the Weighted-Average Remaining Maturity Method Is an Acceptable Method to Estimate Expected Credit Losses. This Q&A document was published in January 2019.
Both documents are available on the FASB web page www.FASB.org.
The article is part of dReport – August 2019, Accounting news.