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FASB

Proposed Changes to U.S. GAAP Taxonomy Reflect Standards for Credit Losses, Debt Classification

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The FASB’s research staff has floated two changes to the U.S. GAAP financial reporting taxonomy to reflect the disclosure requirements in the FASB’s credit loss standard and the changes in the board’s proposed debt classification amendments. The taxonomy is a list of computer readable financial reporting labels coded in the eXtensible Business Reporting Language (XBRL) that are designed to make financial information easier to analyze.

The FASB on October 12, 2018, released two proposed changes to the U.S. GAAP financial reporting taxonomy to reflect the amended accounting guidance for credit losses and debt classification.

Comments on proposed taxonomy updates to the disclosure requirements in the FASB’s new accounting standard for credit losses, Accounting Standards Update (ASU) No. 2016-13 , Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, are due by November 5.

The proposal, GAAP Financial Reporting Taxonomy Implementation Guide, Financing Receivable and Current Expected Credit Loss Disclosures, provides examples to help users of the Taxonomy understand how the modeling for the footnote disclosures related to financing receivables and credit losses is structured within the Taxonomy, the FASB said.

The FASB published the credit loss standard in June 2016. It requires businesses to look to the future to calculate losses on loans, trade receivables, and certain types of securities and set aside reserves to cover the losses. The update applies to banks and other businesses and goes into effect starting in 2020. It is considered the FASB’s chief response to the 2008 financial crisis.

The second proposed change is a brief document that asks whether commenters approve of the FASB’s changes to the financial reporting taxonomy to reflect the amendments in Proposed Accounting Standards Update (ASU) No. 2017-200, Debt (Topic 470): Simplifying the Classification of Debt in a Classified Balance Sheet — Current Versus Noncurrent. Comments are due by November 12.

Proposed ASU No. 2017-200, which the FASB expects to publish as a final update to U.S. GAAP by year-end, calls for new guidelines for classifying debt. The FASB wants debt to be classified as noncurrent if it is due to be settled more than one year from the date of the business’s balance sheet. A debt would also be noncurrent if the business has the right to defer its settlement for at least a year after the balance sheet date.

The taxonomy is a list of computer-readable financial reporting labels coded in the eXtensible Business Reporting Language (XBRL). The taxonomy allows analysts, investors, and others to electronically search for data in financial statements and avoid manually wading through the filings to evaluate financial information.

In the past, the FASB has released a large annual update to the financial reporting taxonomy, typically in the fall, to reflect all changes to U.S. GAAP from the prior year. In 2018, the FASB changed the process, rolling out proposed changes in stages, with the aim of timing changes to the taxonomy to standard-setting activity.

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