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FASB proposes amortization change on some debt securities

Tammy Whitehouse | September 29, 2016

The Financial Accounting Standards Board is proposing to change the accounting rules around how companies would amortize or write down premiums on debt securities that can be redeemed or repurchased before they mature.

FASB is proposing a shorter time period for the amortization to align it with the earliest call date specified in the instrument. Current GAAP says companies should amortize the premium as an adjustment of the yield over the contractual life of the instrument, which leads to longer writedowns.

FASB says it has heard concerns that current GAAP does not include callable debt securities, or those that can be redeemed or repurchased before they mature, even if the holder knows for a fact that the call will be exercised. That leads to a misalignment between the amortization period the company can reasonably expect and the one...

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