It's not just the rule makers who are having trouble agreeing on the best way to account for credit impairments. Investors don't agree on the best approach either.

The CFA Institute recently polled investors globally on whether they like the Financial Accounting Standards Board's proposal for how to get better accounting for credit impairments, or whether they prefer the model established by the International Accounting Standards Board. Both proposals follow an “expected loss” approach, meaning they are meant to take a forward-looking view of credit impairments to draw out early warnings when a company begins to expect its loans may lead to losses. The mechanics and the income statement effects are different, however, with FASB's model producing more upfront recognition of expected losses over the life of loans, even when they are fully performing at the outset. 

The vast majority, 92 percent, of the CFA Institute members who participated in the survey agreed it would be a good idea for the two boards to ultimately settle on a single method that would be effective under both U.S. and international rules. Nearly half, or 46 percent, said they would prefer to see the boards adopt a fair value approach instead of an expected loss approach as FASB and IASB have developed. If they must swallow an expected loss approach, 47 prefer IASB's model while 44 percent prefer FASB's.

When broken down by region, however, the support for each board's approach is a little stronger in their home territories. For example, 55 percent of investors in the Americas preferred FASB's approach compared with only 40 percent of those in the Europe/Middle East/Africa region and 42 percent in Asia Pacific. Similarly, only 41 percent of investors in the Americas preferred the IASB model compared with 50 percent in Europe/Middle East/Africa and 49 percent in Asia Pacific.

FASB and IASB tried to develop a converged model for credit impairments as part of their larger objective to develop converged rules for classification and measurement of financial instruments, hedging, leasing, and insurance. After more than a decade of trying to seek greater consistency in accounting standards, the boards are wrapping up their core convergence projects and are moving on with their own priorities.

FASB Chairman Russ Golden said recently that FASB's long-term standard-setting goal is more about co-existing and cooperating with other major standard setters than about converging to a single set of rules. “FASB's first priority is to improve financial reporting for the benefit of investors and other users of financial information in U.S. capital markets,” he said. The board is committed to doing what it can to converge the core projects but is not planning to work as closely with the international board in the future.