IFRS/US GAAP Convergence on Financial Instruments
Plenary meetings in December 2013 and January 2014 saw the US standard-setter (“FASB”) reverse the decisions made last year on the classification of financial assets.
Keywords: Mazars, Thailand, Accounting, IASB, FASB, IFRS, US GAAP, Financial Instruments, Convergence
19 March 2014
It has now decided not to use the “principal and interest” and “business model” criteria that were developed jointly with the IASB.
The FASB also decided at these meetings to retain the existing US GAAP rules on the bifurcation of derivatives embedded in hybrid assets. The US standard-setter has announced that it will work alone on the remaining issues relating to the classification of financial assets under the current US accounting framework. The FASB will be looking particularly at the new classification criteria based on the contractual cash flows characteristics assessment for non-derivative financial instruments.
Attempts to achieve convergence between IFRS and US GAAP on impairment of financial instruments (Phase 2 of IFRS 9) had already failed in 2013 after the FASB decided to develop its own model, under which the impairment allowance takes account at the outset of full lifetime expected credit losses. However, the latest FASB decisions seem to have finally sounded the death knell for convergence between the IFRS and the US GAAP on financial instruments.