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    Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 11/01/2019, available online: http://www.tandfonline.com/10.1080/00014788.2018.1526665

    Accepted author manuscript, 789 KB, PDF document

    Embargo ends: 11/07/20

    Available under license: CC BY-NC: Creative Commons Attribution-NonCommercial 4.0 International License

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Reflections on the development of the FASB's and IASB's expected-loss methods of accounting for credit losses

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>1/06/2019
<mark>Journal</mark>Accounting and Business Research
Issue number6
Volume49
Number of pages44
Pages (from-to)682-725
Publication statusPublished
Early online date11/01/19
Original languageEnglish

Abstract

After the financial and banking crisis of the late 2000s, the FASB and the IASB aimed to develop methods of accounting for credit losses that would give more timely recognition of those losses. The IASB (in 2009) and the FASB (in 2010) each initially issued its own exposure draft proposing separate approaches to achieving this. They then attempted to agree a converged expected-loss-based method for accounting for credit losses, but failed to achieve convergence. They then each issued an accounting standard that included its own expected-loss method, with effective dates of 2018 for the IASB and 2020/21 for the FASB. This paper provides an overview of the development of proposals and standards in relation to accounting for credit losses issued by the standard setters from 2009 to 2016. It then offers reflections on difficulties that the standard setters faced in this area and on problems that might arise after the new standards become effective. It raises the question of whether a route based on ‘expected loss’, which in relation to credit losses is a concept that originally became prominent for the purpose of setting banks’ capital requirements, was helpful to the process of improving the accounting for credit losses.

Bibliographic note

This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 11/01/2019, available online: http://www.tandfonline.com/10.1080/00014788.2018.1526665