Application of FAS 133 to Loan Commitments

Issue A22—Application of the Definition of a Derivative to Certain Off-Balance-Sheet Credit Arrangements, Including Loan Commitments

Norwalk, CT, December 19, 2001—The Financial Accounting Standards Board (FASB) has received a number of inquiries about the Board’s decision today with respect to loan commitments and the application of Statement 133, Accounting for Derivative Instruments and Hedging Activities, to those loan commitments.

The Board agreed today to post for comment a conclusion on the application of Statement 133 to loan commitments. This conclusion, when final, would require a limited number of loan commitments to be carried at fair value. A decision as to which loan commitments are affected would be based upon a set of qualitative indicators outlined in the guidance. Application of those indicators will require the lender to apply judgment.

The Board action would have no impact on accounting for the majority of loan commitments or other financial instruments of financial institutions with respect to fair value accounting.

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