The Financial Accounting Standards Board (FASB) has posted a FAQ document on its website that is designed to educate those interested in the standard the board is developing on expected credit losses in its financial instruments project.

FASB posted the following with regard to the proposal:

. The board believes the amortized cost measurement objective described in the proposal is consistent with the way an entity expects to realize cash flows from debt instruments. The objective is to reflect the present value of cash flows the entity expects to collect.

. FASB believes the effective interest rate is the best metric to use for recognizing interest income because investors have indicated this to the board.

. The board seeks to faithfully represent expected credit losses and is not aiming for a particular size in the allowance for credit losses.

. Some are concerned that the IASB’s approach would fail to address concerns about delayed recognition of credit losses, at least in the U.S., according to FASB.

Because losses on loans are viewed by some as partly responsible for the recent financial crisis, the boards are under pressure to come up with an appropriate and converged solution. The Financial Stability Board in October urged the boards to renew their efforts to converge.

To read the FASB Credit Loss document:click here.