Refined Definition of Impairment Should Cut Credit Losses, FASB Says

The definition of purchased, credit-impaired financial assets will be tweaked to better reflect the criteria such assets should meet in order to qualify as purchased credit-impaired assets, the Financial Accounting Standards Board said.

The definition of purchased credit-impaired assets will therefore be amended by replacing the word “significant” with “more than insignificant” deterioration in an asset’s credit quality since its origination, based on the assessment of the acquirer, FASB said by a 4-3 majority April 22.

This would significantly reduce a population of purchased assets that FASB’s stakeholders said would be subject to double count of credit losses through earnings, ...