Results of Survey about Credit Losses and Impairment Released by CFA Institute

The Chartered Financial Analyst (CFA) Institute is an US-based association of financial analysts and investment professionals. Its members are spread all over the world. It recently conducted a survey about credit loss and impairment and has now released the results and findings of the survey. The survey shows that there are varied views of investment professionals about the reporting of credit losses and impairment.

The Financial Accounting Standards Board (FASB) issued a proposed model on the accounting treatment of credit losses and impairment in December 2012. Following that the International Accounting Standards Board (IASB) also released expected losses impairment model in March 2013. Although there are calls from all over the world to converge accounting standards, the model offered by the FASB asks for more upfront recognition of expected credit losses than the model offered by the IASB.

The CFA Institute carried out survey to know what are the preferences of its members regarding reporting of credit losses in the financial statements. The primary purpose of the survey was to look for result to back its comment letter to the FASB and the IASB. More than 300 members of the CFA Institute participated in the survey. Following are the key results of the survey:

- The participants were almost equally split on which proposed model they preferred. About 44% of the participants preferred the model offered by the FASB while about 47% of the participants preferred the model proposed by the IASB.

- The American participants primarily supported the model proposed by the FASB (about 53%). The participants from rest of the world primarily supported the model proposed by the IASB. 49% participants from Asia-Pacific supported IASB's model while 42% supported FASB's model. 50% of the participants from Europe, Africa, and Middle East supported IASB's model while 40% supported FASB's model.

- 92% of the participants wanted the IASB and the FASB to arrive at a converged method of estimating the credit losses

The participants also provided feedback about which disclosures related to impairment of financial assets should be included in the financial statements.