October 26, 2018

FASB heeds CUs' CECL concerns; NAFCU urges coordination with NCUA

accountingNoting credit unions' concerns about operational challenges related to the current expected credit loss (CECL) standard, the Financial Accounting Standards Board (FASB) recently agreed to proceed with NAFCU-sought changes, including a delay in the standard's effective date for the industry.

The CECL accounting standard requires financial institutions – including credit unions – to record expected losses whenever they make a new loan. This is causing concern within the industry as it could mean financial institutions may have to either raise more capital or lend less.

The FASB-supported changes would make clear that the implementation of the standard for non-public business entities (PBEs) is only required for fiscal years after Dec. 15, 2021 – so credit unions would not need to begin reporting data on call reports until the beginning of 2022 – and would also clarify that operating lease receivables are not covered within the scope of CECL – a clarification welcomed by NAFCU. A final update is expected to be issued before the end of the year.

As credit unions wait for substantive guidance on the CECL standard, NAFCU continues to urge the FASB to coordinate with the NCUA. The association on Thursday sent a letter to the NCUA outlining NAFCU's efforts to help address credit unions' CECL concerns and encouraged the agency to work with FASB "to reduce burdens on credit unions and alleviate industry uncertainty."

NAFCU will attend FASB's Transition Resource Group for Credit Losses meeting next week, focused on issues that might arise when companies and organizations implement the CECL standard.

Credit unions can learn more about some of the key qualities and trade-offs under various CECL implementation models in a study NAFCU released last year.