The Financial Accounting Standards Board has finalized its long-awaited standard giving companies a new, more forward-looking way to account for credit losses in their portfolios.
Undertaken in the wake of the financial crisis, where troubled loans didn’t become apparent to investors and even regulators until an enormous unraveling occurred, Accounting Standards Update No. 2016-13 will require companies to reflect the possibility of loss when they enter a new credit instrument into the books. FASB published a summary of the new standard and posted a video to the board’s website to explain the new requirements.
