Newsroom

"CECL is the largest accounting change to hit [credit unions] in 40 years," said NCUA Chief Accountant Alison Clark as she shared insights to the Financial Accounting Standards Board's (FASB) current expected credit loss (CECL) standard Friday at NAFCU's Annual Conference.

During her presentation to hundreds of credit union leaders and board members, Clark sought to debunk myths about the standard, share accounting examples and offer tips for the NCUA's approach to CECL during examinations to help credit unions comply. She – and almost all attendees in the room – does not believe that credit unions will receive an exemption or carve-out from FASB, and advised that all credit unions, regardless of size, will need to follow CECL.

Given that the standard is more than 280 pages, Clark recommended a section to focus on: Start on page 95 and concentrate on the next 70 pages. She also shared a number of resources from the NCUA and other regulators, including the FAQ document – which Clark compared to the CliffsNotes version of the standard – released earlier this year. In addition, another interagency FAQ focused on reasonable and supportable forecast is expected to be released later this year.

Clark noted that under the standard, credit unions' historical losses, total losses, charge off guidance and credit risk will not change. As credit unions prepare to implement the standard, Clark outlined steps to follow and provided accounting examples on the WARM method.

The presentation ended with the NCUA's exam expectations: "NCUA does not expect the gold standard or perfection on Day 1," Clark said, but will look instead for "good faith efforts" to meet CECL compliance. She said the agency's CECL supervisory expectations for 2019 will likely be the same for 2020, and examiners will not issue CECL-related documents of resolution or supervisory findings this year or next. Credit unions will need to comply with CECL starting in 2022.

Clark also encouraged credit unions to answer examiners' questions about CECL truthfully, as she will take those conversations and assess what additional resources or educational outreach is needed to support credit unions' implementation efforts.

NAFCU has CECL resources available online.