On March 31st, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) in which a new standard addresses troubled debt restructuring (TDR) and vintage disclosures. The update is designed to provide investors with sufficiently detailed disclosures so they may gather useful information about certain loan refinancings, restructurings, and write-offs. The new ASU undertakes remarks submitted by investors and other stakeholders during the post-implementation review of the credit losses standard. The revisions both create a single model for loan modification accounting by creditors and provide enhanced write-off disclosures and loan modification.
Troubled Debt Restructurings by Creditors That Have Adopted CECL
The FASB’s post-implementation review of the credit losses standard made investors and other stakeholders question the significance of the TDR classification and the usefulness of disclosures about those updates. Feedback received noted that measurement of expected losses under the Current Expected Credit Loss (CECL) accounting standard already incorporates losses actualized from restructurings that are TDRs. Comments also stated that relevant information for investors would be better communicated through enhanced disclosures about certain updates.
Vintage Disclosures—Gross Write-offs
A number of investors expressed that the disclosure of gross write-off information by year of origination was crucial data necessary for their considerations. The amendments in the new ASU address these responses by requiring a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases.
The revisions set forth in the new ASU would also:
remove the accounting guidance for TDRs provided by creditors that have adopted CECL
enhance disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty
The ASU and further information are available at fasb.org.