Measuring credit losses on financial instruments


In June 2016 the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which added ASC 326 to the Codification. The amendments

  • Removed the thresholds that companies applied under legacy guidance to measure credit losses on financial instruments that are measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities;
  • Removed all recognition thresholds and required companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life; and
  • Amended the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets.

NDS 2016-10 summarizes the amendments under ASU 2016-03.


The guidance in ASU 2016-13 is currently effective for “public business entities” (as defined) who are SEC filers, excluding small reporting companies, for both annual and interim periods.


For all other entities, the guidance in ASU 2016-13 is effective for fiscal years, including interim periods within those fiscal years, beginning after Dec. 15, 2022. The guidance in ASU 2016-13 may be early adopted as of the beginning of a fiscal year.






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