The Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) that would address issues raised by stakeholders during the implementation of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Stakeholders are encouraged to review and provide input on the proposed ASU by July 29, 2019.
 
A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset—but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).
 
In response to this question, the proposed ASU would permit organizations to record negative allowances on PCD assets.
 
In addition to other narrow technical improvements, the proposed ASU would also reinforce existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.
 
The proposed ASU is available here.