The IASB and the FASB continued to discuss a 'three-category' expected loss approach to the impairment of financial assets.
The boards decided to pursue a model in which the overall objective is to reflect the deterioration in the credit quality of financial assets. Under this approach, impairment losses would initially be on the basis of the objective for the first category (or bucket), being the category into which loans are placed on origination. The boards asked the staff to develop a principle that would underpin the measurement attribute of the credit allowance for financial assets in that category. In addition, the boards asked the staff to develop a principle and indicators for when recognition of lifetime expected losses becomes appropriate. The boards emphasised that robust disclosures will be critical to support the principle-based impairment model and to ensure comparability between entities. Furthermore, the boards emphasised that the staff should consider the application of the model for various types of financial assets, notably debt securities, and various types of entities, notably non-financial institutions.