June 12, 2018

FASB expected to clarify CECL implementation dates

The Financial Accounting Standards Board (FASB) indicated that it would issue guidance to clarify the implementation dates of its current expected credit losses (CECL) standard. While this standard goes into effect for credit unions fiscal years beginning after Dec. 15, 2021, the guidance would clarify that they would not need to begin reporting data on losses on call reports until the beginning of 2022.

The board signaled the forthcoming guidance Monday during its Transition Resource Group meeting on CECL and possible issues that might arise when the standard goes into effect. NAFCU Senior Regulatory Affairs Counsel Ann Kossachev and Doug Wright, CFO of NAFCU-member Mission Federal Credit Union, attended the meeting.

"Overall, the issues discussed today were not as controversial as some prior meetings," Wright said. "FASB staff did a nice job of making good recommendations that are helpful in terms of implementation for credit unions. In many cases, they sided on practical expedients or solutions that allow existing practices to continue, rather than creating additional complexity or burden for the industry."

Kossachev noted that although credit unions would not need to start reporting the loss data in 2021 under the CECL standard, they would need to have a model in place to ensure smooth data collection to prepare for the reporting. The additional time will allow credit unions to see how business entities report the data and how auditors and regulators approach the standard.

Other topics discussed during Monday's meeting included:

  • capitalized interest and possibly including additional examples ­and clarification on premiums and discounts due to unclear and inconsistent guidance;

  • accrued interest and how the non-accrual policy currently in call reports would affect account for assets with zero allowance;

  • transfers between classifications and agreement with the reversal approach suggested in the issue guidance (FASB may issue additional clarifications on mortgage and non-mortgage calculation); and

  • recoveries and providing additional flexibility in the issue guidance to account for existing practices, differences in the treatment of different portfolios and to limit the impact on internal controls.