FASB to Debate Car Lender Concerns on Credit Loss Standard
At its November 14 meeting, FASB will consider the concerns that underwriters of auto loans to customers with poor credit have raised about part of the board’s credit loss standard. These lenders told FASB in May and June that they were worried about how to make the transition to the standard; most expect to measure new loans at fair value, but retain existing loans on their books at amortized cost. The lenders are concerned that the different valuation methods will make their financial statements confusing for investors. “This obviously would create a situation where you have fair value on the new book that you’ve elected but you would have amortized cost on the old book,” said FASB assistant director of technical activities Shayne Kuhaneck on November 1. “The agenda request is to be able to, at transition, have one-time transition relief to elect the fair value option for all of the old book so you have comparability.”
Small Business Advisory Committee to Discuss Goodwill, Leases
FASB plans to discuss its project on improving accounting for goodwill with its Small Business Advisory Committee (SBAC). Goodwill accounting has long been a source of frustration, and ASU 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill, crafted by FASB’s Private Company Council (PCC), allows private companies to amortize goodwill on a straight-line basis over a maximum of 10 years. Private companies that elect to amortize goodwill must test for impairment under certain circumstances rather than annually, as required of public companies. In addition, the impairment test can be performed either at the entity level or at the reporting unit level. The board also wants to hear how companies are preparing for FASB’s much-watched lease accounting standard, which goes into effect for public companies in less than two months.
ASB Agrees to Align Final Standard with PCAOB Guidance
The AICPA’s Auditing Standards Board (ASB) has unanimously agreed to issue a final omnibus standard that will align its guidance with the PCAOB standards issued after the AICPA completed its Clarity Project in 2012. The board believes the amended guidance will improve the quality of private company audits. The ASB also made progress on its effort to converge its standards with the guidance issued by the International Auditing and Assurance Standards Board (IAASB) on the auditor reporting model, and it plans to vote for a final standard at its January 2019 meeting. The effective date is expected to be no earlier than for audits of financial statements for periods ending on or after December 15, 2020.