Answer
Both entities concede that transparency and understandability would be enhanced through the application of fair values. The IASB came up with a split model under IFRS9 whereby it specifies the items for which fair values are applicable and those for which amortized costs are applicable. FASB embraced the same methodology of classifying the items, but there are divergences regarding how impairments of various financial instruments should be accounted for, especially on notes receivable. To illustrate, the approach proposed by IASB requires that the estimations are made within short durations, unlike the FASB model. Consequently, the IFSR model could result in late recognition of impairments. Nonetheless, there have been significant improvements in approaches for computing the uncollectible accounts.
Work Step by Step
Both entities concede that transparency and understandability would be enhanced through the application of fair values. The IASB came up with a split model under IFRS9 whereby it specifies the items for which fair values are applicable and those for which amortized costs are applicable. FASB embraced the same methodology of classifying the items, but there are divergences regarding how impairments of various financial instruments should be accounted for, especially on notes receivable. To illustrate, the approach proposed by IASB requires that the estimations are made within short durations, unlike the FASB model. Consequently, the IFSR model could result in late recognition of impairments. Nonetheless, there have been significant improvements in approaches for computing the uncollectible accounts.
