FASB Comment Letter: TDR proposal


On Dec. 23, Grant Thornton submitted a comment letter in response to the FASB’s proposed ASU, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The proposed ASU is designed to eliminate the recognition and measurement guidance for creditors that modify financial assets in a troubled debt restructuring (TDR), and would instead require enhanced disclosures for modified financial assets whose borrower is experiencing financial difficulty.


The current expected credit losses guidance requires an entity to measure and record lifetime expected credit losses on financial assets upon origination or acquisition, and, as a result, credit losses from loans modified as TDRs have been incorporated into the allowance for credit losses. Investors and financial statement preparers observed that the additional designation of a loan modification as a TDR, along with the related accounting and disclosures, is unnecessarily complex and no longer provides decision-useful information, resulting in the FASB’s proposal.


The proposal also codifies that public business entities should disclose gross write-offs by year of origination, by class of financing receivable, and by major security type in the vintage disclosures.


While we support the FASB’s proposals, we would like to see some clarifications made, as outlined in our comment letter.


Download the letter to read our remarks in full.



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