Credit Losses A&A Guide
On Nov. 11, 2021, the AICPA issued its long-awaited credit losses audit and accounting (A&A) guide. In addition to addressing items covered in the September 2019 practice aid, the guide provides implementation observations and adds a new chapter for accounting issues addressed by the FASB’s Credit Losses Transition Resource Group (TRG) or the AICPA’s Financial Reporting Executive Committee (FinREC) as follows:
- Scope exception for loans and receivables between entities under common control
- Scope of purchased financial assets with credit deterioration guidance for beneficial interests within FASB ASC 325-40
- Application of FASB ASC 325-40 for trading securities
- Refinancing and loan prepayments
- Measurement inputs for short-term arrangements
- Discounting inputs using a method other than a discounted cash flow method
- Reasonable and supportable forecast – developing the period and use of historical information
- Reversion method: estimation versus accounting policy
- Determining the life of a credit card receivable
- Zero expected credit losses
- Accounting for TDRs
- Capitalized interest
- Gains and losses on subsequent disposition of leased assets
- Accounting for changes in foreign exchange rates
- Inclusion of future advances of taxes and insurance payments
- Considerations related to FASB ASC 326 for insurance-entity-specific balances
- Transition guidance for pools of financial assets
- Application of subsequent events