5. At the June 2017 Credit Losses Transition Resource Group meeting, stakeholders noted that if entities chose to adjust the effective interest rate for prepayments upon the adoption of the amendments in Update 2016-13, those entities using a discounted cash flow method to estimate expected credit losses on a preexisting troubled debt restructuring would be required to use the prepayment assumptions in effect immediately before the restructuring date. Stakeholders noted that, to adopt Update 2016-13, identifying the restructuring date for each troubled debt restructuring and recreating the appropriate economic assumptions that existed immediately before those dates would be operationally complex and time consuming. Stakeholders requested transition relief that would reduce the operational burden associated with adjusting the effective interest rate on preexisting troubled debt restructurings upon the adoption of the amendments in Update 2016-13.

6. The Board did not intend to introduce significant operational complexities when measuring expected credit losses on preexisting troubled debt restructurings. Therefore, at its December 13, 2017 meeting, the Board decided to allow entities an accounting policy election to calculate the prepayment-adjusted effective interest rate on preexisting troubled debt restructurings using the prepayment assumptions that exist as of the date that an entity adopts the amendments in Update 2016-13, instead of the prepayment-adjusted effective interest rate immediately before the restructuring date.