No Extension of Troubled Debt Restructurings Rule
The FASB has rejected a request by two AICPA panels that the board extend the troubled debt restructurings (TDR) relief rule it just issued to all companies, unanimously agreeing it would do more harm than good. Accounting Standards Update (ASU) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Credit Losses, which the board published on March 31, only eliminates TDR accounting rules for creditors that have already adopted the current expected credit losses (CECL) standard. The TDR exemption rule was limited to CECL adopters only because the CECL model captures a lifetime estimate of expected credit losses, including most loans modified as TDRs. But for companies that have not yet adopted CECL, recognizing and measuring troubled debt restructurings is an important part of reporting incurred loan losses, according to the board’s discussion. “I think that to eliminate TDR accounting for entities that remain under the incurred loss model would be harmful to investors and to other users of financial statements, and I would not support going down that path,” FASB member Christine Botosan said. “I feel that while we can be sympathetic to firms as they go through this transition year, I think TDR accounting has been both part of the incurred loss model for a number of decades, and it’s been an integral part of the incurred loss model,” FASB member Fred Cannon added.
National Standard-Setters Sought to Partner on Research Efforts.
The IASB said is looking to partner with a small number of national standards-setters to obtain research evidence about how effective changes that were made to its accounting rules impact the way companies make materiality judgments. Standards-setters’ contributions would involve coordinating research in their jurisdictions, selecting academics to conduct this research, and supporting the academics in their work. The objective of the research would be to gather enough information to enable the IASB to assess the effects of the following three documents on investors, companies, auditors, and regulators:
- Definition of Material (Amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors);
- IFRS Practice Statement 2, Making Materiality Judgements; and
- Better Communication in Financial Reporting—Making Disclosures More Meaningful.
Search for Board Members Launched
The IFRS Foundation, the trustee body with oversight responsibility of the IASB, said it is seeking applicants from Asia-Oceania and Europe to fill vacant seats on the board. The IASB develops international financial reporting standards (IFRS) for more than 140 jurisdictions worldwide. Board members serve an initial five-year term, which may be renewed up to a maximum of five years. The roles are full-time and based in London. The IASB typically averages 14 members, but after its second Constitution Review in 2011, trustees announced that the membership of the IASB may be expanded in 2012 to 16 members, according to its annual report. The review recommended the following geographic distribution of seats: four members from Asia–Oceania, four from Europe, four from North America, one from Africa, one from South America, and two from any area. The seats are also intended to represent a mix of investors, financial statement preparers, auditors, and academics, so that all aspects of financial reporting are covered during board deliberations. Since the review, the number of board seats have fluctuated. Currently the board seats 11 members, including Chair Andreas Barckow.