Car lenders that specialize in loans to customers with shaky credit could benefit from a FASB proposal to tweak a narrow part of its major new rules to calculate expected loan losses.

The Financial Accounting Standards Board proposal, issued Feb. 6, would allow businesses that elect to measure newly originated and purchased loans at fair value to also use fair value to measure their old loans.

It essentially would allow lenders to move their existing loan book—currently measured at amortized cost—to the same measurement basis they plan to use when they apply the FASB’s new credit losses standard. This would mean apples-to-apples comparisons between reporting periods when businesses start following the new credit losses standard starting in 2020, FASB said.

If the proposal is finalized, FASB expects subprime automobile lenders to take advantage of using fair value across all reporting periods when they adopt the new credit losses standard. Several lenders and car dealers wrote to FASB in 2018 asking the board to take the action.

They said, “‘What we think would be most useful to our users is if we could move our old book—existing loans—over to the same basis of accounting all at once, so going forward there’s not mixed measurement at the balance sheet date,” said Grant Thornton LLP partner Graham Dyer about the car lenders’ concerns.

Several subprime auto lenders and one used car dealership flagged the issue with the FASB because they said the board’s 2016 credit losses standard—ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments—would result in certain auto lenders booking significant loan losses up front and inflating interest income in later periods. The businesses told FASB they plan to use the option in the standard that allows businesses to measure financial assets at fair value. They said they believed this would give investors and analysts better insight into what the companies expect to collect from their customers.

But when they start using fair value, the measurement of the new loans will not match the loans booked in prior reporting periods.

The Feb. 6 proposal—Proposed Accounting Standards Update (ASU) No. 2019-100, Targeted Transition Relief for Topic 326, Financial Instruments—Credit Losses—would amend the transition guidance in the 2016 standard to allow for a one-time option to use fair value in recognizing financial instruments. The proposal doesn’t apply to held-to-maturity debt securities such as bonds, FASB said. Comments are due March 8.

FASB’s credit losses accounting standard takes effect starting in 2020. Developed in the aftermath of the 2008 financial crisis, it aims to make banks and other businesses recognize losses earlier in the credit cycle than currently. It will require businesses to look to the future to calculate losses they expect for loans and other financial instruments instead of recording losses after they have happened.