Great news if you hold certain callable debt securities at a premium! The FASB issued guidance that shortens the amortization period for callable debt securities held at a premium that have noncontingent call features at fixed prices and on preset dates.
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Entities will amortize the premium to the earliest call date rather than over the contractual life of the callable debt security. If the debt security is not called on the earliest call date, the entity would reset the yield using the payment terms of the debt security. These changes intend to align the accounting for such securities with the market pricing. No additional or new disclosures are required. However, entities must disclose the change in accounting principle in the period of adoption.
The guidance is effective for public business entities for fiscal years beginning after December 15, 2018 and one year later for all others. Early adoption is permitted. The guidance should be applied using a modified retrospective approach.