The financial and banking crisis of the late 2000s meant the way credit losses are accounted for came to the forefront and two alternatives were put forward by standard setters. This new academic research, from a team at Lancaster University Management School, led by Professor John O’Hanlon, considers the opinions commentators have given on these proposed changes and the issues that may become apparent when these standards come into force.
Background
The financial and banking crisis of the late 2000s prompted criticism of delayed loss recognition under incurred-loss methods of accounting for credit losses. Both the FASB and the IASB aimed to make accounting for credit losses more forward-looking and timely.
Initially, they each proposed different approaches before submitting a joint FASB/IASB 2011 Supplementary Document and follow-on proposals aimed at achieving a single expected-loss solution. However, they could not agree on a converged solution.
Consequently, each board issued an exposure draft and then a final standard that included its own expected-loss method, with effective dates of 2018 for the IASB and 2020/21 for the FASB.
What this report includes
The research reports on analysis of comment-letters from US and non-US respondents in response to the FASB and IASB exposure drafts and the joint FASB/IASB Supplementary Document that were issued between 2009 and 2013. In particular, it focuses on issues relevant to the standard setters’ difficulties in achieving convergence and issues that may cause difficulties when the standards become effective.
