The original proposal for the Accounting Standards Update (ASU) on the recognition and measurement of financial instruments would have required banks and other financial institutions to make a complete overhaul of their process for determining the classification of securities and loans. The final standard, however, turned out to be closer to an oil change.
Originally referred to as the “classification and measurement standard,” ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” was issued by the FASB on Jan. 5, 2016.
This article explains the changes the FASB made during the five years of work on the project – changes primarily affecting equity investments, deferred-tax assets on available-for-sale securities, and disclosures.
Financial institutions will welcome two of the final standard’s developments, both of which can be adopted early: