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IASB and FASB Credit-Loss Models

In October 2008, the U.S. Financial Accounting Standards Board and the International Accounting Standards Board established the Financial Crisis Advisory Group as part of a joint approach to address the credit-loss reporting issues arising from the global financial crisis and an ongoing effort to unify U.S. and international standards. In...

In October 2008, the U.S. Financial Accounting Standards Board and the International Accounting Standards Board established the Financial Crisis Advisory Group as part of a joint approach to address the credit-loss reporting issues arising from the global financial crisis and an ongoing effort to unify U.S. and international standards.  In July 2009, the FCAG published a report, recommending alternatives to the incurred loss model that would use more forward-looking information. After working on separate models to address the FCAG recommendations, FASB and IASB published a joint proposal known as the three-bucket impairment model in 2011.

In July 2012, FASB began to express concerns about the complexity of the three-bucket approach, leading it to propose and issue for public comment “current expected credit-losses model.” In March 2013, the IASB responded by introducing its own “credit deterioration model.”

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