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FASB ISSUES STATEMENT ON LOAN IMPAIRMENT

 NORWALK, Conn., June 1 /PRNewswire/ -- The Financial Accounting Standards Board today released its Statement 114, which addresses the accounting by creditors for impairment of certain loans. The statement is effective for fiscal years beginning after Dec. 15, 1994.
 The statement applies to all creditors and to all loans, whether or not collateralized, and to all loans that are restructured in a troubled debt restructuring involving a modification of terms. It does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value or lower of cost or fair value, leases, and debt securities.
 Statement 114 requires that impaired loans within its scope be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, which is the contractual interest rate adjusted for any deferred loan fees or costs, premium, or discount existing at the inception or acquisition of the loan. FASB Project Manager Carol Clarke explained that "Statement 114 also allows creditors, as a practical expedient, to measure the loan at its observable market price or the fair value of the collateral if the repayment of the loan is expected to be provided solely by the underlying collateral."
 Statement 114 also amends FASB Statement 5 on accounting for contingencies to clarify that a creditor should evaluate the collectibility of both contractual interest and principal of all receivables when assessing the need to accrue a loss. Additionally, the statement amends FASB Statement 15 on troubled debt restructuring to require a creditor to measure all loans that are restructured in a troubled debt restructuring involving a modification of terms in accordance with Statement 114.
 Copies of the statement, "Accounting by Creditors for Impairment of a Loan," are available for $10.50 each from the FASB, P.O. Box 30816, Hartford, Conn., 06150. Connecticut orders should add 6 percent sales tax.
 -0- 6/1/93
 /NOTE TO EDITORS: For order information call 203-847-0700, ext. 555/
 /CONTACT: Deborah Harrington of Financial Accounting Standards Board, 203-847-0700, Ext. 268/


CO: Financial Accounting Standards Board ST: Connecticut IN: FIN SU: ACC

WB-LR -- NY081 -- 4085 06/01/93 15:58 EDT
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Date:Jun 1, 1993
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