WASHINGTON (3/11/13)--The Credit Union National Association last week reiterated there is growing anxiety about the Financial Accounting Standards Board's (FASB) proposal regarding financial reporting of expected credit losses on loans and other financial assets. CUNA Deputy General Counsel Mary Dunn said CUNA is addressing these issues head on, and will meet with FASB officials in mid-March.
During a Thursday CUNA "Pressing Regulatory and Compliance Issues Audio Conference," free to CUNA-affiliated credit unions and leagues, CUNA Senior Assistant General Counsel for Regulatory Advocacy Luke Martone noted that FASB's proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. This would replace the multiple existing impairment models in U.S. generally accepted accounting principles (GAAP) that primarily use an "incurred loss" approach.
Under the proposal, Martone said, a credit union would estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future. The proposed approach--referred to as the current expected credit loss (CECL) model--considers more forward-looking information than is currently permitted under GAAP.
Martone said credit unions are concerned that:
- The model could cause a doubling of an entity's credit impairment allowance; and
- The proposed "expected loss" approach would require use of speculative forecasting of the performance of an asset over the remainder of the asset's life.During this year's Governmental Affairs Conference, CUNA's accounting subcommittee met with guests from the industry as well as the National Credit Union Administration to discuss this and other issues.
FASB is accepting public comments on the proposal until April 30, and CUNA is developing its comment letter on this issue which it will circulate later this month.
Consumer Financial Protection Bureau issues were also addressed during the call. Dunn said "CUNA is going to stay vigilant, but overdraft protection action does not seem to be at the top of the agency's list of priorities for the time being." She noted that student loans are a priority for the CFPB and CUNA is talking with the agency on those issues. She said NCUA has also raised issues regarding appropriate controls over student loan programs and that additional guidance may be developing.
Thursday's session was the first of four related audio conferences CUNA is offering during the year. CUNA recommends that registrants attend all four to ensure a complete first-hand view of the latest regulatory and compliance issues, first-hand. An archived version of the session will be posted.
Other topics addressed during the free CUNA call included:
- The latest legislative developments affecting credit unions;
- Pending NCUA proposals and a summary of the February NCUA board meeting actions; and
- Proposals currently open for comment.
covered other CFPB and NCUA issues that were addressed during the call in Friday's edition. (See March 8 News Now
story: New Credit Rating, CFPB Info Featured In CUNA Pressing Issues Call.)
Topics for the spring, summer and fall offerings will be announced as those programs are finalized. Those sessions are scheduled for June 4, Sept. 5 and Dec. 5.
For more on the CUNA call, and regulatory resources, use the links.