In January 2011, FASB and IASB issued a proposal regarding loan losses that suggested separating loans into a “good book” and a “bad book” based on whether each loan had an indication of a credit loss or not. The 2011 proposal would have required a reserve for all expected losses on the bad book and for some expected losses on the good book. The approach would have eliminated the need for a loss to have actually occurred before it was recognized.
