September 19, 2018

CECL clarification appreciated, says NAFCU, but CUs should be exempt

CECLNAFCU and its members appreciate the clarifications of the current expected credit loss (CECL) standard, including those pertaining to the effective date for credit unions, but maintains that the industry should never have been included within the scope of the CECL standard in the first place.

NAFCU shared comments on the CECL clarifications with the Financial Accounting Standards Board (FASB) in a letter yesterday. Last month, the FASB issued a request for feedback on its proposed update to the current CECL effective date for non-public business entities, making clear that the implementation of the standard is only required for fiscal years after Dec. 15, 2021. The FASB's proposal would also clarify that operating lease receivables are not covered within the scope of CECL – a clarification welcomed by NAFCU.

In the letter, NAFCU Senior Regulatory Affairs Counsel Ann Kossachev noted support for a delay in the standard's effective date as it applies to non-public business entities, including credit unions, since the dates were first announced. "Credit unions are still struggling to gather a sufficient amount of data and many are unsure how they will be able to afford the software necessary to implement CECL," she wrote.

Regarding the clarification that operating lease receivables are not covered under CECL, Kossachev said the industry was encouraged by the FASB's attention to detail on this matter, adding that the current accounting method for operating leases is "well understood and ingrained in the industry."

Kossachev urged the FASB to coordinate with the NCUA to establish better resources for credit unions as they implement the CECL standard. According to recent NAFCU Economic & CU Monitor data, credit unions are still waiting for substantive guidance on the CECL standard.

"A stronger FASB-NCUA partnership would prove incredibly beneficial for credit unions seeking to better understand exactly when the CECL model must be implemented, where to find CECL software vendors, and how to locate other helpful CECL tools," Kossachev wrote.