Proposed Accounting Overhaul: Is Quality Being Sacrificed for Quantity?
The Financial Accounting Standards Board’s recent proposal on computing impairment for certain financial assets would impact loss calculations for loan portfolios and commitments as well as investment portfolios. The FASB proposal represents an overhaul of impairment standards and includes several major changes.
If FASB enacts the proposal, financial institutions will need to gaze into the future to estimate losses over the life of the loan — prompting higher reserves. Will this provide clarity or confusion for financial statements users?
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