Board Meeting Handout. Accounting for Financial Instruments October 14, 2009

Transcription

1 Board Meeting Handout Accounting for Financial Instruments October 14, 2009 INTRODUCTION 1. The objective of today s meeting is to discuss the following issues: a. Issue 1: The Recognition Principle for Financial Instruments b. Issue 2: Initial Measurement of Financial Instruments c. Issue 3: Accounting for Transaction Costs and Fees Related to Financial Instruments ISSUE 1: RECOGNITION PRINCIPLE 2. An accounting model, like the one the project on accounting for financial instruments is developing for financial instruments, needs a principle for recognizing the items involved. As per the FASB Accounting Standards Codification, a recognition principle deals with recognition of assets, liabilities, or sometimes equity instruments (balance sheet items only), in particular, the nature of what is recognized, the timing, and any related criteria (or any combination of those items). STAFF RECOMMENDATION 3. The staff recommends the following recognition principle for financial instruments: An entity shall recognize all of its financial instruments in its statement of financial position as either financial assets or financial liabilities depending on the entity s present rights or obligations in the contracts. The staff prepares Board meeting handouts to facilitate the audience s understanding of the issues to be addressed at the Board meeting. This material is presented for discussion purposes only; it is not intended to reflect the views of the FASB or its staff. Official positions of the FASB are determined only after extensive due process and deliberations

2 4. Additionally, the staff recommends that the definition of a financial instrument, as defined in the Master Glossary, be amended to delete the reference to some financial instruments not being recognized. That phrase is inconsistent with the proposed principle and also is not a definitional matter. The staff s recommended changes are as follows: Financial Instrument: Cash, evidence of an ownership interest in an entity, or a contract that both: a. Imposes on one entity a contractual obligation either: 1. To deliver cash or another financial instrument to a second entity 2. To exchange other financial instruments on potentially unfavorable terms with the second entity. b. Conveys to that second entity a contractual right either: 1. To receive cash or another financial instrument from the first entity 2. To exchange other financial instruments on potentially favorable terms with the first entity. The use of the term financial instrument in this definition is recursive (because the term financial instrument is included in it), though it is not circular. The definition requires a chain of contractual obligations that ends with the delivery of cash or an ownership interest in an entity. Any number of obligations to deliver financial instruments can be links in a chain that qualifies a particular contract as a financial instrument. Contractual rights and contractual obligations encompass both those that are conditioned on the occurrence of a specified event and those that are not. All contractual rights (contractual obligations) that are financial instruments meet the definition of asset (liability) set forth in FASB Concepts Statement No. 6, Elements of Financial Statements, although some may not be recognized as assets (liabilities) in financial statements that is, they may be off-balance-sheet because they fail to meet some other criterion for recognition. For some financial instruments, the right is held by or the obligation is due from (or the obligation is owed to or by) a group of entities rather than a single entity. 2

3 Question for the Board Does the Board agree with the recognition principle stated in paragraph 3? ISSUE 2: INITIAL MEASUREMENT OF FINANCIAL INSTRUMENTS BACKGROUND 5. At the July 15, 2009 Board meeting, the Board discussed classification and measurement of financial instruments. While the Board made the following decision at that meeting, the discussion did not address initial recognition and measurement: a. All financial instruments would be measured at fair value with all changes in fair value recognized in net income unless the following criterion is met: (1) If an entity s business strategy is to hold debt instruments with principal amounts for collection or payment(s) of contractual cash flows rather than to sell or settle the financial instruments with a third party, certain changes in fair value for those instruments may be recognized in other comprehensive income. 6. Initial measurement of financial instruments was considered by the Board in the project on financial instruments with characteristics of equity. At the June 10, 2009 Board meeting, the Board decided the following: a. Equity instruments should be measured initially at the transaction price. b. Financial liabilities and assets should be measured initially at fair value. The primary reason for this recommendation was to be consistent with the initial measurement principles in various pieces of existing U.S. generally accepted accounting principles. 7. At that Board meeting, the Board acknowledged that its measurement decisions for freestanding liabilities and assets are subject to change as a result of future deliberations in the project on accounting for financial instruments project. The objective in the project on financial instruments with characteristics of equity is to provide initial measurement guidance for equity instruments, instruments that are 3

4 separated under that project, and assets and liabilities for which there was no guidance. Therefore, that project would set measurement requirements only for particular assets and liabilities, not all assets and liabilities. Because the scope of the project on accounting for financial instruments is broader, initial measurement requirements for liabilities or assets would need to follow the recognition and measurement guidance set forth in that project. The issue for the Board is whether the initial measurement of financial instruments within the scope of the project should be fair value or transaction price. DEFINITIONS 8. The Master Glossary defines the term fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Paragraph (originally issued as paragraph 17 of FASB Statement No. 157, Fair Value Measurements) states that in many cases the transaction price, that is, the price paid (received) for a particular asset (liability), will represent the fair value of that asset (liability) at initial recognition, but not presumptively. Furthermore, paragraph C52 of Statement 157 states that Conceptually, entry and exit prices are different In many cases the transaction price will equal the exit price and, therefore, represent the fair value of the asset or liability at initial recognition, but not presumptively (a change to Concepts Statement 7). 9. The staff is using the same definition of transaction price as was used in the 2007 Preliminary Views, Financial Instruments with Characteristics of Equity. Paragraph 30 of the Preliminary Views document defines transaction price as follows: For this purpose, the term transaction price does not include transaction costs, when they are included in the price paid by the seller (to the buyer) or billed and paid separately. 4

5 ALTERNATIVES Alternative 1: Transaction Price 10. Alternative 1 is based on the transaction price and would establish a principle for initial measurement that may be different for subsequent measurement of financial instruments. In instances in which the transaction price of a financial instrument differs from its fair value at initial recognition, measurement based on the transaction price would not result in a day one gain or loss. However, because the financial instrument would be required to be measured at fair value subsequently, the difference between the transaction price and fair value will have to be dealt with subsequently. The staff has identified the following for dealing with that difference: a. Alternative 1(a): Recognize the difference between the transaction price and fair value upon the first remeasurement of the financial instrument. The difference would be recognized in either net income or other comprehensive income depending on the classification of the instrument. b. Alternative 1(b): Do not recognize the difference between the transaction price and the initial fair value and recognize only subsequent changes in fair value. 11. Under Alternative 1(a), the difference between the transaction price and fair value would be recognized, following the classification of the instrument, in net income or other comprehensive income upon the first remeasurement of the instrument. If recognized in other comprehensive income upon the first remeasurement, that difference would remain in other comprehensive income, and offset with subsequent changes in fair value, until the instrument was sold or matured, at which time the remaining difference, if any, would be realized in net income. 12. Under Alternative 1(b), an instrument would be recorded at the transaction price at inception. Upon the first subsequent remeasurement, the fair value would be compared with the fair value at inception. The difference between the two fair values would be recognized in either net income or other comprehensive income. However, the difference between the transaction price and the initial fair value would not be recognized until final settlement. For example, if the transaction price is $100, initial fair value is $98, and fair value upon first remeasurement is 5

6 $95, then the financial instrument would be initially recognized at the transaction price of $100, and the first remeasurement would result in a new carrying amount of $97 ($100 $3) with the $3 ($98 $95) being recognized in either net income or other comprehensive income. The instrument would never be recorded on the balance sheet at fair value because its measure would reflect the initial transaction price plus/minus subsequent changes in fair value. Alternative 2: Fair Value 13. Alternative 2 is based on fair value for initial measurement and would result in a day one gain or loss when the transaction price of a financial instrument differs from its fair value at initial recognition. This would require the need to address whether the day one gain or loss should be recognized in net income or other comprehensive income. The staff has identified two alternatives below. a. Alternative 2(a): All day one gains and losses would be recognized immediately in net income, regardless of the classification of the financial instrument as fair value through net income or fair value through other comprehensive income. b. Alternative 2(b): For instruments classified as fair value through net income, the day one gain or loss would be recognized immediately in net income. For financial instruments classified as fair value through net income instruments, the day one gain or loss would be recognized in other comprehensive income. 14. Alternative 2(a) would result in all day one gains and losses being recognized immediately in net income when incurred rather than in a later period. For example, if the fair value of an instrument is higher than its transaction price, Alternative 2(a) would result in recognizing a gain on day one. 15. For financial instruments that are classified as fair value through other comprehensive income, this alternative is not consistent with the recognition of subsequent fair value changes in other comprehensive income. For debt instruments that have subsequent changes recognized in other comprehensive income, some amount would be expected to remain in other comprehensive income at the maturity of the instrument. This is because as the debt instrument nears its maturity, the fair value should converge to or approach its par value (excluding the 6

7 effects of credit). The staff believes that amount could either be recycled into net income at maturity or reversed into net income as an adjustment of yield over time. 16. Alternative 2(b) would require any day one gain or loss to be recognized in a manner consistent with recognition of subsequent fair value changes based on the classification of the financial instrument. That is, for financial instruments classified as fair value through net income, day one gains or losses would be recognized in net income immediately. For financial instruments classified as fair value through other comprehensive income, day one gains or losses would be recognized in other comprehensive income. For those fair value through other comprehensive income instruments, subsequent changes in fair value would also be recognized in other comprehensive income, which would be expected to fully offset the initial gain or loss by the time the instruments settle if they settle at par. For fair value through other comprehensive income instruments, this alternative recognizes day one gain and loss in other comprehensive income and, therefore, results in the same effect to the income statement as using the transaction price at inception (that is, the same as Alternative 1(a)). Questions for the Board What should be the initial measurement for financial instruments included in the scope of the project on accounting for financial instruments? If fair value is selected as the initial measurement attribute for financial instruments, (a) should all day one gains and losses be recognized in net income or (b) should day one gains or losses be recognized in net income for fair value through net income instruments and other comprehensive income for fair value through other comprehensive income instruments? If transaction price is selected as the initial measurement attribute for financial instruments, when should the difference between the initial fair value and the transaction price be recognized? 7

8 ISSUE 3: ACCOUNTING FOR TRANSACTION COSTS AND FEES BACKGROUND 17. The Board discussed transaction costs in its meeting on June 18, The Board voted to expense all transaction costs for asset and liability instruments on the basis that transaction costs are not an attribute of an asset or a liability. The Board reached that decision acknowledging that the project on accounting for financial instruments could potentially raise the same question. 18. Transaction costs, as defined in the Master Glossary, represent: The incremental direct costs to sell an asset or transfer a liability in the principal (or most advantageous) market for the asset or liability. Transaction costs are not an attribute of the asset or liability; rather, they are specific to the transaction and will differ depending on how the reporting entity transacts. However, transaction costs do not include the costs that would be incurred to transport the asset or liability to (or from) its principal (or most advantageous) market. 19. Investment companies under the AICPA Audit and Accounting Guide, Investment Companies, include transaction costs (that is, commissions and other direct costs) as part of the cost basis of a financial instrument purchased. Paragraph 2.51 of the Guide provides guidance on determining costs and realized gains/losses of financial instruments held by the investment company. It states that cost includes the commission and other charges that are part of security purchase transactions. 20. Subtopic on nonrefundable fees and other costs (originally issued as FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases) requires loan origination fees and certain loan origination costs to be treated similarly and be netted at initial measurement and reported as part of the loan balance on the balance sheet and amortized as an adjustment to yield. Paragraphs and (originally issued as paragraphs 5 and 21 of Statement 91) state the following: 8

9 Loan origination fees shall be deferred and recognized over the life of the loan as an adjustment of yield (interest income). Likewise, direct loan origination costs defined in paragraph 6 shall be deferred and recognized as a reduction in the yield of the loan except as set forth in paragraph 14 (for a troubled debt restructuring). Loan origination fees and related direct loan origination costs for a given loan shall be offset and only the net amount shall be deferred and amortized. The unamortized balance of loan origination commitment and other fees and costs and purchase premiums and discounts that is being recognized as an adjustment of yield pursuant to this statement shall be reported on the enterprise s balance sheet as part of the loan balance to which it relates. 21. The Master Glossary defines loan origination fees as follows: Origination fees consist of all of the following: a. Fees that are being charged to the borrower as prepaid interest or to reduce the loan's nominal interest rate, such as interest buy-downs (explicit yield adjustments) b. Fees to reimburse the lender for origination activities c. Other fees charged to the borrower that relate directly to making the loan (for example, fees that are paid to the lender as compensation for granting a complex loan or agreeing to lend quickly) d. Fees that are not conditional on a loan being granted by the lender that receives the fee but are, in substance, implicit yield adjustments because a loan is granted at rates or terms that would not have otherwise been considered absent the fee (for example, certain syndication fees addressed in paragraph ) e. Fees charged to the borrower in connection with the process of originating, refinancing, or restructuring a loan. This term includes, but is not limited to, points, management, arrangement, placement, application, underwriting, and other fees pursuant to a lending or leasing transaction and also includes syndication and participation fees to the extent they are associated with the portion of the loan retained by the lender. 9

10 22. The Master Glossary defines direct loan origination costs as follows: ALTERNATIVES Direct loan origination costs represent costs associated with originating a loan. Direct loan origination costs of a completed loan shall include only the following: a. Incremental direct costs of loan origination incurred in transactions with independent third parties for that loan b. Certain costs directly related to specified activities performed by the lender for that loan. Those activities include all of the following: 1. Evaluating the prospective borrower's financial condition 2. Evaluating and recording guarantees, collateral, and other security arrangements 3. Negotiating loan terms 4. Preparing and processing loan documents 5. Closing the transaction. The costs directly related to those activities shall include only that portion of the employees' total compensation and payrollrelated fringe benefits directly related to time spent performing those activities for that loan and other costs related to those activities that would not have been incurred but for that loan. See Section for examples of items. 23. Alternative 1: Expense transaction costs/recognize fees in net income (such as loan origination fees) immediately for all financial instruments. The treatment of fees and costs for all financial instruments would be the same. 24. Alternative 2: Adjust the cost basis of all financial instruments for transaction costs/ fees and recognize upon first remeasurement in either net income or other comprehensive income. 25. Alternative 2 is consistent with the guidance in the Guide, which would result in including the transaction costs in the basis of the security upon initial measurement and then immediately recognizing a loss on day two when financial instruments are 10

11 fair valued. This is because the fair value (day two measure) does not include the transaction costs. Some believe this simplifies day one accounting because it does not require separation of the transaction costs from the transaction price. 26. Alternative 3: Method of recognition of transaction costs/fees depends on the classification of the financial instrument: a. For financial instruments classified as fair value through net income, recognize in net income immediately at inception of the transaction (same as Alternative 1). b. For financial instruments classified as fair value through other comprehensive income, defer in other comprehensive income and recognize as a yield adjustment over the life of the related financial instrument. [Statement 91 approach] 27. This alternative would result in a change from current practice for all financial instruments that would be classified as fair value through net income. For example, for loans held for resale, paragraph (originally issued as paragraph 21 of FASB Statement No. 65, Accounting for Certain Mortgage Banking Activities) requires that loan origination fees and the direct loan origination costs as specified in Statement 91 shall be deferred until the related loan is sold. If the loan is held for investment, such fees and costs shall be deferred and recognized as an adjustment of yield as specified in paragraphs of Statement 91. Under the proposed model, loans held for resale would be classified in the fair value through net income category. Therefore, this alternative would require transaction costs/fees to be recognized immediately in earnings rather than upon sale of loans. 28. For financial instruments classified as fair value through other comprehensive income, the staff believes that under this alternative, items (a) and (d) in the definition of direct loan origination fees would be part of the fair value of the loan (that is, interest buy-downs and implicit yield adjustments because a loan is granted at rates or terms that would not have otherwise been considered absent the fee). As a result, the staff believes the remaining fees and costs is what would be included in the amount to be deferred in other comprehensive income. 11

12 29. Alternative 4: Method of recognition of transaction costs/fees depends on the classification of the financial instrument: a. For financial instruments classified as fair value through net income, recognize at inception of the transaction (same as Alternative (1) b. For financial instruments classified as fair value through other comprehensive income, expense transaction costs, but defer fees in other comprehensive income and recognize as a yield adjustment over the life of the related financial instrument. Question for the Board How should transaction fees and costs be accounted for? 12

13 Board Meeting Handout Financial Statement Presentation October 14, 2009 Purpose of the meeting The Board will continue deliberations on the October 2008 Discussion Paper, Preliminary views on Financial Statement Presentation. During this meeting, the Board will deliberate: (a) (b) The classification of items of other comprehensive income (OCI) on the statement of comprehensive income (SCI) The allocation of income taxes on the SCI and the presentation of income taxes on the statement of financial position (SFP) and the statement of cash flows (SCF). Note: the paragraph and issue numbers in this handout correspond to paragraph numbers in the Board memoranda used as the basis for discussion. Board Memo 69A The statement of comprehensive income Issue 1: Single statement of comprehensive income 2. The discussion paper proposes that an entity present a single statement of comprehensive income. Overall, respondents to the discussion paper are split as to whether an entity should present comprehensive income and its components in a single statement of comprehensive income or in two separate statements. 5. As discussed at the July 2009 joint meeting, both the FASB and the IASB (collectively, the boards) have made decisions in their financial instruments projects that require consideration of whether an entity should be required to present a single statement of comprehensive income faster than that issue can be addressed in the financial statement presentation (FSP) project. The FASB plans to propose that all entities present a single statement of comprehensive income in its exposure draft on financial instruments (to be issued early next year). The IASB agreed that it should The staff prepares Board meeting handouts to facilitate the audience's understanding of the issues to be addressed at the Board meeting. This material is presented for discussion purposes only; it is not intended to reflect the views of the FASB or its staff. Official positions of the FASB are determined only after extensive due process and deliberations.

14 address the issue in the near-term in something other than the FSP project. The IASB will discuss that issue at its October 2009 meeting. 6. For those reasons, the staff does not plan to ask the boards to deliberate that aspect of the discussion paper. Issue 2 Classification of OCI components 8. The discussion paper proposes that items of other comprehensive income should be presented in a separate section that is displayed with prominence equal to that of all the other sections. It further states that for each item in the OCI section except a foreign currency translation adjustment on a consolidated subsidiary (and, in International Financial Reporting Standards (IFRS), proportionately consolidated joint ventures), an entity should identify and indicate in the SCI whether the item relates to (or will relate to) an operating activity, investing activity, financing asset, or financing liability. 12. A majority of comment letter respondents agree that indicating the category to which an item of OCI relates provides decision-useful information. Respondents indicate that the information will provide users of financial statements with a view of where and how those elements either are affecting or will eventually affect information presented in the operating, investing, and financing categories. Staff Recommendation 18. The staff recommend that the boards retain the requirement proposed in the discussion paper that for each item in the OCI section (with the exception of a foreign currency translation adjustment on a consolidated subsidiary and a proportionately consolidated joint venture [IFRS only]), an entity should identify and indicate on the SCI the category or section to which the OCI item relates. 19. At the October 2009 joint meeting, the boards will continue their deliberations on the definitions of the business and financing sections. As part of that meeting, the boards will consider whether particular categories will be required for those sections. In November, the boards will consider whether the classification of assets Page 2 of 5

15 and liabilities into sections and categories should be presented on the SFP or in the notes to financial statements. The tentative decisions reached at those meetings may require the boards to revisit their tentative decision about the classification of components of OCI. Memo 69A Question 1 The staff recommend that the boards retain the discussion paper proposal that an entity identify and indicate on the SCI the category or section to which each item of OCI relates (except foreign currency translations adjustments). Does the Board agree with that recommendation? Board Memo 69B Income tax allocation and presentation 2. The discussion paper proposes that an entity should apply existing requirements for allocating and presenting income taxes in the SCI. This may result in an entity presenting income tax expense or benefit in the discontinued operations and other comprehensive income (OCI) sections in addition to determining the income tax effect for continuing operations (the income tax section). An entity should not allocate income taxes to the business or financing section or to categories within those sections. 5. The boards propose in the discussion paper that an entity should present income tax assets, liabilities, and cash flows in an income tax section in the SFP and the SCF but propose to retain allocation of income taxes in the SCI. The result is that an entity might present some income tax expense or benefit in the discontinued operations and OCI sections of the SCI rather than in the income tax section that corresponds to the SFP and the SCF. 7. The majority of respondents to the discussion paper agree with retaining the existing requirements for allocating and presenting income taxes in the SCI. Those respondents note that a subtotal of income from continuing operations before and after tax is important and that separate income tax information about discontinued operations and OCI items is also useful. Page 3 of 5

16 15. The discussion paper did not specifically ask respondents about the proposal that income taxes be presented separately in the SFP and the SCF. The staff do not recall any letters raising concerns with that proposal and, therefore, the staff see no reason to modify that aspect of the discussion paper. 16. In 2007, the IASB amended IAS 1 to permit components of OCI to be displayed either (a) net of related tax effects or (b) before related tax effects and to require disclosure of income tax allocated to each component of OCI. That amendment is similar to the requirement in US GAAP. 18. As the IASB just recently amended IAS 1 to converge with US GAAP on this issue, the staff see no reason to change existing requirements to disclose the amount of income tax allocated to each component of OCI. Furthermore, the staff believe that any concerns constituents have with the allocation of income taxes to OCI items should be addressed in an income tax project, not the financial statement presentation project. Staff Recommendation 21. The majority of respondents agree with the boards preliminary view on income tax allocation. The boards recently affirmed the proposals in the discussion paper to retain a profit or loss subtotal, and separate sections for OCI items and for discontinued operations. In addition, the proposal related to intraperiod tax allocation in the recent IASB exposure draft Income Tax 1 is consistent with the proposal in the discussion paper for allocating income taxes in the SCI. Therefore, the staff see no reason why the boards should change their view on this issue as proposed in the discussion paper. 1 That exposure draft is to replace IAS 12 Income Taxes and to converge with US GAAP. The exposure draft proposes that an entity recognize income tax expense arising at the time of a transaction or other event in the same component of comprehensive income (ie continuing operations, discontinued operations, or items in OCI) or equity in which it recognizes that transaction or other event. Page 4 of 5

17 22. The staff recommend that the Board: a. retain the proposal in the discussion paper that an entity should apply existing requirements for allocating and presenting income taxes in the SCI, including the requirement that an entity present components of OCI either (i) net of related tax effects or (ii) before related tax effects b. retain the existing requirement that an entity disclose the amount of income tax allocated to each component of OCI c. retain the proposal in the discussion paper that an entity present current and deferred income tax assets and liabilities recognized in accordance with IFRSs or US GAAP and related cash flows in an income tax section on the SFP and the SCF. Memo 69B Questions 1 through 3 1. The staff recommend that the exposure draft retain the proposal that an entity allocate and present income taxes in the SCI in accordance with existing requirements. Does the Board agree with the staff recommendation? 2. The staff recommend that the exposure draft retain the existing requirement that an entity disclose the amount of income tax allocated to each component of OCI. Does the Board agree with the staff recommendation? 3. The staff recommend that the exposure draft retain the proposal that an entity present current and deferred income tax assets and liabilities recognized in accordance with IFRSs or US GAAP and related cash flows in an income tax section on the SFP and the SCF. Does the Board agree with the staff recommendation? Page 5 of 5

18 Board Meeting Handout Disclosures about Credit Quality and the Allowance for Credit Losses October 14, 2009 Purpose of the Meeting 1. At the October 14, 2009 meeting, the staff plans to discuss with the Board its plans for the deliberation of the Exposure Draft, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The staff will ask the Board whether it would like to proceed with deliberations as a standalone project or consider it in conjunction with the project on accounting for financial instruments. 2. As a basis for this discussion, the staff distributed an overview of the comment letter summary to the Board. The comment letter summary will be posted to the FASB s website after the meeting. Plan for Deliberations 3. At this meeting, the staff will ask the Board whether it wants to: (a) (b) Continue deliberations of the issues raised in comment letters as a standalone project with the intention of issuing a final Accounting Standards Update in late 2009/early Consider the issues raised in comment letters as part of its deliberations in the project on accounting for financial instruments. 4. If the Board decides to continue deliberations as a standalone project, the staff will ask the Board for any suggested revisions to the staff s proposed list of issues to be deliberated. The list of issues is as follows: (a) Scope Financing Receivables: (i) Exclude loans measured at fair value and lower of cost or market The staff prepares Board meeting handouts to facilitate the audience s understanding of the issues to be addressed at the Board meeting. This material is presented for discussion purposes only; it is not intended to reflect the views of the FASB or its staff. Official positions of the FASB are determined only after extensive due process and deliberations.

19 (ii) Exclude all leases or certain leases (for example, leveraged leases) (iii) Exclude all promises to give that are assets of not-for-profit entities, regardless of duration (iv) Exclude all trade receivables or only certain trade receivables (v) Expand the scope to include unfunded lending commitments. (b) Scope All Creditors: (i) Exclude certain creditors. (c) Rollforwards of the Allowance for Credit Losses and Financing Receivables: (i) (ii) Modify the requirement to disclose a rollforward of financing receivables by portfolio segment Disclose separately the information in the rollforwards based on whether a financing receivable is individually or collectively evaluated for impairment. (d) Credit Quality Disclosures: (i) (ii) Modify the requirement to disclose quantitative and qualitative information about the credit quality of financing receivables that are carried at amortized cost and are neither past due nor impaired Modify the requirement to provide an aging analysis for financing receivables that are past due but not impaired (iii) Modify the requirement to disclose information about modified loans that were previously past due. (e) Fair Value Disclosures: (i) Modify the requirement to disclose the fair value of loans by portfolio segment as well as the method(s) and significant assumptions used by portfolio segment to estimate the fair value. Page 2 of 3

20 (f) Interim and Annual Reporting Periods: (i) Modify the requirement to provide the proposed disclosures for all interim and annual reporting periods. (g) Effective Date: (i) Modify the effective date. (h) Other: (i) (ii) Modify any proposed requirements to disclose information about financing receivables that are carried at a measurement other than amortized cost Modify the proposed guidance for determining portfolio segments and classes of financing receivables. Page 3 of 3