Guidance for Credit Card Receivables to Receive Another Look

As banks prepare to implement FASB’s amended standard for loan loss accounting, the board may have to clarify how to estimate the life of instruments such as credit card receivables with no specific payoff date. The standard requires earlier recognition of losses on loans, certain debt securities, and receivables, but there is no consensus about how to apply some of its requirements to card receivables. FASB plans to provide some clarity on the issue in early October, staff said on September 6. FASB has set up an advisory group of bankers, auditors, and analysts to address questions about the standard ahead of its effective date; the panel, called the Transition Resource Group (TRG), discussed the credit card question at a meeting in June but did not reach a consensus. “It gets really darn complicated,” said Michael Gullette, senior vice president of tax and accounting for the American Bankers Association.

Amended Guidance for Classifying Debt Moves Forward

At its September 13th meeting, FASB proposed an amendment to U.S. GAAP that would require businesses to more clearly distinguish between the debts they must repay in the next 12 months versus those that will not mature for at least another year. The proposed amendment has proven controversial with privately held businesses and small public companies because it may make it harder for them to raise investment capital or borrow funds. The board reviewed feedback on the proposal at its June 28 meeting but has not taken formal action. In July, a majority of the board’s Private Company Council (PCC), once among the harshest critics of the plan, said they could back the proposal as written. One PCC member said he had a change of heart about the proposal after hearing arguments about a company balance sheet representing a point in time. It made sense, he said, to “pick a point in time” and record the debts as reflected on that date.


Cooperation with Basel Committee Elevated to Formal Status

The IFRS Foundation and the Basel Committee on Banking Supervision have extended their working relationship into a formal arrangement to promote stability and discipline in the capital markets. The cooperative effort between the foundation and the Basel Committee dates back to the formation of the IFRS Monitoring Board, the international panel of securities regulators set up to oversee the foundation’s activities. The agreement calls for central bankers and bank regulators who belong to the Basel Committee to have a greater say in the IASB’s standards setting, through efforts such as regular meetings of the chair of the Basel Committee’s Accounting Experts Group and IASB and IFRS Foundation representatives. “There is a real desire for international organizations to be more joined up when developing standards for global finance,” said Michel Proda, IFRS Foundation chairman. “This agreement will help achieve that by strengthening and formalizing the already high levels of cooperation between the IFRS Foundation and the Basel Committee.”