New Accounting Pronouncements


A.	Adoption of New Accounting Standards

Credit losses (Accounting Standards Update (ASU) 2016-13) – In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance to introduce a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance also applies to debt securities and other financial assets measured at fair value through other comprehensive income. The new guidance was effective January 1, 2020 and was applied using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of January 1, 2020. Prior period comparative information has not been recast and continues to be reported under the accounting guidance in effect for those periods.

The most significant effects of adoption relate to the change in methodology for estimating our Allowance for credit losses from an incurred loss model to a current expected credit loss model. We elected to present accrued interest receivable related to our finance receivables in Finance receivables, net. In prior period comparative information, accrued interest receivable continues to be reported in Other assets. The adoption did not have a material impact on our financial statements.

The cumulative effect of initially applying the new credit loss guidance to our consolidated financial statements on January 1, 2020 was as follows:



Consolidated Statement of Financial Position (Millions of dollars)	Balance as of December 31, 2019		Cumulative Impact from Adopting New Credit Loss Standard			Balance as of January 1, 2020
Assets:
Finance receivables, net	$	27,832	$	42		$	27,874
Other assets	$	1,292	$	(53	)	$	1,239

Liabilities:
Other liabilities	$	893	$	2		$	895

Shareholder's equity
Retained earnings	$	3,162	$	(13	)	$	3,149

See Note 3 for additional information.

We adopted the following ASUs effective January 1, 2020, none of which had a material impact on our financial statements:



ASU	Description
2018-13	Fair value measurement
2018-15	Internal-use software
2018-19	Codification improvements - Credit losses
2019-04	Codification improvements - Credit losses, Derivatives & hedging, and Financial instruments
2019-05	Financial instruments - Credit losses
2019-11	Codification improvements - Credit losses
2019-12	Simplifying accounting for income taxes
2020-02	Financial instruments - Credit losses
2020-03	Codification improvements - Financial instruments


B.	Accounting Standards Issued But Not Yet Adopted

We consider the applicability and impact of all ASUs. The ASUs were assessed and either determined to be not applicable or not expected to have a material impact on our financial statements.