Removing Barriers Blog

CUNA Urges FASB to Delay CECL
Posted September 11, 2019 by CUNA Advocacy

Today, CUNA sent a letter to FASB in support of its plan to delay the effective dates of several financial instruments standards, including CECL.

In response to concerns related to implementation of standards, FASB has proposed a philosophy to extend and simplify how effective dates are staggered between larger public companies and all other entities. Under this philosophy, a major accounting standard update would first be effective for large public companies, followed by at least a two year delay for all other entities. We support this proposed philosophy as it would apply to major accounting standard updates. Given the challenge credit unions and other non-public entities encounter when implementing major accounting changes, we believe it is important that a delayed effective date for smaller entities be formalized into FASB’s standards. Providing non-public entities additional time over large public companies will provide entities with limited resources the ability to learn from the implementation processes of those entities with vast resources.

Further, we support the proposed delay of the effective dates for the CECL, leases, and hedging accounting standards, as such changes would be consistent with the Board’s proposed new effective date philosophy. However, it is important FASB be aware that CUNA’s longstanding position has been and continues to be that application of CECL to credit unions is inappropriate. CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities. In addition, we maintain that CECL will hinder lenders’ (including credit unions) ability to uplift low- and moderate-income borrowers in their goal of achieving financial independence and the American dream. A completely unintended, though real, consequence of CECL is that it will force lenders to be much more discerning of potential borrowers with less than perfect credit.