Issue of Interest: Accounting Policy

ABA Media Contact: Blair Bernstein
(202) 663-5468
E-mail: bbernste@aba.com​
Last update: June 16, 2016​

ABA represents the banking industry on policy issues related to accounting and auditing. By meeting regularly with regulators and accounting standard setters both domestically and internationally on new developments, ABA works to achieve accuracy and improvement in financial reporting standards.

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have issued exposure drafts regarding the accounting for financial instruments. While dubbed "financial instruments" projects, these projects are really about bank accounting and represent the biggest overhaul of accounting principles ever.

In summary, there are three main issues:
1. Classification and measurement: What assets and liabilities should be measured at amortized cost (with an allowance for losses) and what should be measured at fair value?
2. Impairment: For those assets measured at amortized cost, how should the allowance for losses be measured?
3. Hedge accounting: For derivatives that are used in hedges, what requirements and accounting entries should there be?

Accounting Standard Setters

Accounting rules can be developed by a number of governing agencies. Accounting rules that U.S. banks must currently follow are issued by the Financial Accounting Standard Board (GAAP - Generally Accepted Accounting Principles), the Executive Committee of the American Institute of Certified Public Accountants (AICPA) and the regulators (the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Currency Comptroller, and the Office of Thrift Supervision.)

If a bank is a securities registrant, it must also follow the accounting rules issued by the Securities and Exchange Commission and certain rules issued by the Public Company Accounting Oversight Board.

International standards, followed by European countries and Australia are set by the International Accounting Standards Board (IASB).

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