Financial Instruments─Credit Losses (Topic 326)─Targeted Improvements to the Accounting for Troubled Debt Restructuring for Creditors
Last updated on March 17, 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 *)
In 2020, FASB staff began conducting outreach with stakeholders who adopted Update 2016-13 as part of the Post-Implementation Review (PIR) process. Preparers generated feedback about TDR accounting for creditors, including that the allowance for credit losses already captures the impact of most concessions recognized as TDRs and recommended that the Board eliminate TDR accounting altogether. This feedback repeated concerns raised about TDR accounting during previous Transition Resource Group (TRG) meetings. Users also commented that TDRs no longer provide decision useful information for an entity that has adopted Update 2016-13. Stakeholders emphasized the same issues at the CECL Public Roundtable hosted by the FASB on May 20, 2021.
On July 14, 2021, the Board added a project to its technical agenda to consider removing TDR recognition and measurement guidance by creditors for entities that have adopted Update 2016-13 and to consider enhancing certain loan modification disclosures. On October 13, 2021, the Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
On November 23, 2021, the Board issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The due date for comment letters was December 23, 2021.
The Board redeliberated the determination of the effective interest rate for entities that use a discounted cash flow model to measure the current expected credit losses (CECL) allowance for assets that are modified and accounted for as a continuation of the original asset.
The Board decided to require that an entity use an effective interest rate derived from the post-modification contractual interest rate for entities using a discounted cash flow approach to measure the allowance for credit losses for financial assets that are modified and accounted for as a continuation of the original financial asset.
A summary of decisions reached can be found here.
Last updated on March 17, 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 *)
Objective:
The objective of this project is to consider removing troubled debt restructuring (TDR) recognition and measurement guidance for creditors from GAAP for entities that have adopted Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and to consider enhancing disclosures for modifications made to borrowers experiencing financial difficulty.Background:
On June 16, 2016, the FASB issued Update 2016-13, which requires organizations to measure all expected credit losses for financial instruments held at the reporting date. This update largely retained the TDR guidance in Subtopic 310-40, which provides guidance to determine which loan modifications represent TDRs and how creditors should account for those TDRs. Although Update 2016-13 did eliminate specific impairment guidance in Subtopic 310-40, TDR recognition and measurement principles, as well as some of the disclosure requirements, were not amended.In 2020, FASB staff began conducting outreach with stakeholders who adopted Update 2016-13 as part of the Post-Implementation Review (PIR) process. Preparers generated feedback about TDR accounting for creditors, including that the allowance for credit losses already captures the impact of most concessions recognized as TDRs and recommended that the Board eliminate TDR accounting altogether. This feedback repeated concerns raised about TDR accounting during previous Transition Resource Group (TRG) meetings. Users also commented that TDRs no longer provide decision useful information for an entity that has adopted Update 2016-13. Stakeholders emphasized the same issues at the CECL Public Roundtable hosted by the FASB on May 20, 2021.
On July 14, 2021, the Board added a project to its technical agenda to consider removing TDR recognition and measurement guidance by creditors for entities that have adopted Update 2016-13 and to consider enhancing certain loan modification disclosures. On October 13, 2021, the Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.
Exposure Draft(s):
On November 23, 2021, the Board issued a proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The due date for comment letters was December 23, 2021.
- Download the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
- Read comment letters on the proposed Accounting Standards Update.
Read the press release on the proposed Accounting Standards Update.
Decisions Reached at Last Meeting (March 16, 2022):
The Board redeliberated the determination of the effective interest rate for entities that use a discounted cash flow model to measure the current expected credit losses (CECL) allowance for assets that are modified and accounted for as a continuation of the original asset.
The Board decided to require that an entity use an effective interest rate derived from the post-modification contractual interest rate for entities using a discounted cash flow approach to measure the allowance for credit losses for financial assets that are modified and accounted for as a continuation of the original financial asset.
Tentative Board Decisions Reached to Date (as of March 16, 2022):
A summary of decisions reached 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.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
| March 16, 2022* | Board Meeting—The Board redeliberated the determination of the effective interest rate for entities that use a discounted cash flow model to measure the expected credit losses (CECL) allowance and decided to require that an entity use an effective interest rate derived from the post-modification contractual interest rate. |
| Februrary 2, 2022 | Board Meeting—The Board began redeliberations in response to comment letters received on the proposed Accounting Standards Update Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The Board affirmed its decisions from the proposed Accounting Standards Update and made limited changes based on redeliberations. |
| October 13, 2021 | Board Meeting–The Board decided that TDR recognition and measurement guidance would be eliminated for creditors that have adopted the amendments in Update 2016-13. The Board also decided to require creditors to enhance their disclosures related to modifications made to borrowers experiencing financial difficulty. Lastly, the Board directed the staff to draft a proposed Accounting Standards Update.
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| July 14, 2021 | Board Meeting—The Board added a project to its agenda to address the accounting for Troubled Debt Restructurings by Creditors who have adopted Update 2016-13. |
The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
Marla Lewis
Practice Fellow
mlewis@fasb.org
Daniel Stuhlemmer
Project Manager
dstuhlemmer@fasb.org
Tanya Paul
Post-Doctoral Fellow
tpaul@fasb.org
Justin Helm
Postgraduate Technical Assistant
jhelm@fasb.org
Katie Deakins
Postgraduate Technical Assistant
kdeakins@fasb.org
Practice Fellow
mlewis@fasb.org
Daniel Stuhlemmer
Project Manager
dstuhlemmer@fasb.org
Tanya Paul
Post-Doctoral Fellow
tpaul@fasb.org
Justin Helm
Postgraduate Technical Assistant
jhelm@fasb.org
Katie Deakins
Postgraduate Technical Assistant
kdeakins@fasb.org
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.