FASB Wipes Clean a "Tainted" Provision

Financial Accounting Standards Board

The Financial Accounting Standards Board's decision to reaffirm existing guidelines for writing off impaired debt securities comes as a relief to the banking industry.

The Financial Accounting Standards Board's discussion on revising certain aspects of FAS 115, the standard that governs much of the treatment of debt securities for profit-and-loss and balance-sheet purposes, set off a firestorm of concern in banking circles.

Much of the controversy has centered on Emerging Issues Task Force Issue 03-1, which provides guidance on the meaning of the phrase "other-than-temporary impairment" and its application to several types of debt securities. Last year, when FASB issued EITF 03-1-a — which would delay the effective date of certain provisions of 03-1 — the board received more than 250 comment letters, "the vast majority" of which requested that 03-1 be rescinded in its entirety, according to the board.

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