The Financial Accounting Standards Board is starting the new year with a bold step away from convergence on financial instruments and impairments.
Before breaking for the holidays, FASB made two key decisions on its project to write new standards for financial instruments that put the board at odds with the direction of the International Accounting Standards Board. FASB decided to abandon an idea heavily criticized in the United States to require a model for classifying debt investments driven by the payment of principal and interest. Instead, FASB will stick with the current guidance that calls for bifurcation, or separation of the elements in hybrid or complex financial instruments. “Although this is a tentative decision, given that it is fundamental to the direction of the project, it seems unlikely that the FASB will revisit it,” wrote PwC in a recent alert.
