Accounting Boards Agree on Proposal for Loan Impairment


The International Accounting Standards Board and the Financial Accounting Standards Board agreed on how to require banks to book losses on loans earlier than they do now. The deal calls for all loans to start in a first category, when a bank books losses on cash flows it thinks it may not receive over the next 12 months. Lifetime losses would be booked only if there has been a significant deterioration in credit quality, and default is likely. The boards will release the revised joint proposal on impairment in 2012, with the standard likely to be effective in 2015.