We conducted this 2013 member survey about key elements of the FASB and IASB proposals to provide support for our views on impairment, including the related recognition and measurement of interest income and the supporting disclosures.
Highlights from the member survey include:
- Convergence – Respondents overwhelmingly (92%) support the FASB and the IASB arriving at a method of estimating credit losses that is the same under both U.S. Generally Accepted Accounting Standards (U.S. GAAP) and International Financial Reporting Standards (IFRS). They have a similar opinion with respect to interest income recognition.
- Impairment Model –
- When asked what method of measuring credit losses would be most decision-useful, 46% indicated fair value would be their preference over the expected credit loss model (41%). Interestingly, the comments reflect a desire by investors for both measurements because of a need to reconcile and understand the differences in measurement (i.e. fair value being utilized as a reference point for expected losses).
- When asked whether they preferred the IASB or FASB’s expected loss model, there was a slight preference for the IASB model (47%) over the FASB model (44%). There were, however, distinct regional preferences.
- Interest Income Recognition – As to the interest income recognition pattern, a majority favored the IASB model (52%), whereas 37% favored the FASB model. Our member survey and direct outreach indicates the Boards need greater communication outreach and comparison of interest income recognition approaches.
- Disclosures – Disclosures related to underlying assumptions and credit-quality were rated highest by respondents (e.g. assumptions & techniques, credit-quality information, write-off policy and discount rate). Missing, but extremely important to investors, were disclosures related to:
- the development of expected credit loss estimates (79%) and
- the cash flow characteristics of financial instruments (75%).
Respondents to the survey were invited to provide elaborative comments to each question and regarding other matters they deemed important. These comments were especially helpful in providing insight and context to the reasoning behind member responses. Selected representative comments are included throughout the survey report.