Financial Instruments─Credit Losses (Topic 326)─Acquired Financial Assets

Last updated on February 8, 2022. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Sections updated on the date above are indicated with an asterisk *)



The objective of this project is to consider (1) expanding the scope of the purchased credit deteriorated (PCD) accounting model to all loans acquired in a business combination and (2) modifying the presentation of expected credit losses for acquired financial assets that meet the definition of PCD.


On June 16, 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires organizations to measure all expected credit losses for financial instruments held at the reporting date.  One of the changes made in this update was intended to simplify the accounting for acquired financial assets that have experienced credit deterioration since origination. After the issuance of the Update, the Board received feedback that accounting for acquired financial assets remained complex, and that there were potential consequences of the accounting model in place under CECL. In 2020, FASB staff began conducting outreach with stakeholders who adopted Update 2016-13 as part of the Post-Implementation Review (PIR) process, and stakeholders raised similar concerns. Stakeholders also emphasized these issues at the CECL Public Roundtable hosted by the FASB on May 20, 2021.

On July 14, 2021, the Board decided to add a project to its technical agenda to address the accounting for acquired financial assets within the scope of Update 2016-13 and directed the staff to perform additional research and outreach on possible amendments to accounting for acquired financial assets.

Exposure Draft(s):

There are no exposure documents at this time.

There are no media releases or educational materials at this time.

Decisions Reached at Last Meeting (Februrary 2, 2022):

The Board decided to amend the accounting for acquired assets to eliminate the distinction between purchased credit deteriorated (PCD) and non-PCD assets. The Board decided to apply the PCD accounting model for acquired assets, with certain exceptions.

The Board decided to exclude certain asset classes from the PCD accounting model, including credit cards and other revolving lending arrangements in which the borrower has borrowing privileges and available-for-sale debt securities.

The Board decided to apply the PCD accounting model to assets acquired in a business combination and in an asset acquisition.

The Board decided to incorporate an element of “seasoning” into the PCD accounting model for assets acquired in both a business combination and an asset acquisition to define whether an asset is an in-substance origination and, therefore, should not apply the PCD accounting model.

The Board discussed whether to incorporate a difference between contractual and expected cash flows into the definition of seasoning. The Board decided not to pursue further outreach and research on this area.

Tentative Board Decisions Reached to Date (as of Februrary 2, 2022):

A summary of the Board’s tentative decisions reached to date can be found here.

The Board meeting minutes, handouts, and videos are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

The following are links to the minutes for each meeting.  To view Board meetings and handouts from the past 90 days, click here.
Februrary 2, 2022 * Board Meeting—The Board began initial deliberations and decided to expand the PCD accounting model to all assets acquired in a business combination or asset acquisition, with limited exceptions. The Board also decided that an element of seasoning was needed to prevent in-substance originations from applying the PCD accounting model.
July 14, 2021 Board Meeting—The Board added a project to its agenda to address the accounting for acquired financial assets within the scope of Update 2016-13.

The Board directed the staff to perform additional research and outreach related to the accounting for acquired financial assets, including:
  1. Potential alternatives for a definition of seasoning that are principle based, rules based, or a combination of the two
  2. Whether assets not recognized at fair value in a business combination should apply the non-PCD accounting model or whether the allowance for credit losses should be recognized through purchase accounting
  3. The terminology to be used to describe the accounting models for acquired assets
  4. Presentation
  5. Transition.

Marla Lewis
Practice Fellow

Daniel Stuhlemmer
Project Manager

Tanya Paul
Post-Doctoral Fellow

Justin Helm
Postgraduate Technical Assistant

Katie Deakins
Postgraduate Technical Assistant

The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.