February 03, 2022

FASB unanimously votes to eliminate TDR accounting guidance, declines to defer CECL adoption

ColumnThe Financial Accounting Standards Board (FASB) met Wednesday and unanimously voted to draft a final update eliminating troubled debt restructuring (TDR) accounting guidance for creditors who have adopted the current expected credit loss (CECL) standard, with an effective date of Dec. 15, 2022.

NAFCU had requested that FASB allow early adoption of TDR elimination for all entities regardless of whether or not they have implemented CECL; however, the Board voted to make early adoption available only to entities that have implemented CECL. Of note, one Board member stated that TDR elimination and CECL adoption represent a "quid pro quo."

In addition, the Board also voted to adopt enhanced disclosure requirements, making several clarifying changes to the scope of the disclosures.

On CECL deferral, the Board voted 6-1 to neither defer for one year nor indefinitely defer the effective date of CECL implementation for non-public filers. The Board stated that their reasoning for voting against a deferral include feedback from prudential regulators indicating that institutions will be ready by the January 2023 mandatory CECL implementation date, as well as concerns with establishing two different accounting standards for public and non-public entities.

The lone dissenting Board Member noted that he was persuaded to exempt nonpublic entities after hearing the credit union perspective and by NCUA Board Member Hood’s warning that the “costs of CECL on credit unions overwhelmingly exceed the benefits.”

NAFCU has urged FASB to eliminate the adoption of CECL, citing major credit union concerns with the accounting standard. The association has previously called on FASB to exempt all non-public filers, including credit unions, from compliance with the CECL standard.

NAFCU will continue to keep credit unions up-to-date on any notable changes regarding CECL and FASB via NAFCU Today.