Friday was the first meeting of FASB’s
Transition Resource Group, which is focused on improving FASB’s pending changes
to its credit impairment standard, also referred to as CECL (current expected
credit losses). As reflected in the material
from Friday’s meeting, the proposal’s revised language provides additional
flexibility, stating that there is no one methodology that entities must use.
FASB’s intent is that each institution apply the method that is appropriate for
its portfolio based on the knowledge of its business and processes.
Credit unions are represented on the
Group by two CUNA members, Susan Hannigan, CFO at Jeanne D’Arc CU in Lowell,
MA, and Doug Wright, CFO at Mission FCU in San Diego. Following last week’s
meeting, Hannigan noted that the revisions are “progress toward a workable
solution.” By allowing community financial institutions to evaluate and adjust
their loan-loss amounts using qualitative factors, historical losses, and
current systems, such as spreadsheets and narratives, FASB has made important
changes to its proposed accounting standard.
These proposed changes come less than a
month after CUNA’s latest advocacy efforts to improve the standard. In mid-March,
CUNA teamed up with the Community Bankers of America (ICBA) to send a detailed
letter to FASB Chairman Russell Golden expressing concerns and providing
suggestions to improve the proposal. Also in March, CUNA initiated its
Grassroots Action Center to urge credit unions to contact Golden directly with
their concerns, resulting in roughly 1,000 individual letters sent to the
standard-setter.
FASB expects to finalize its credit
impairment standard by the middle of this year.