Removing Barriers Blog

FASB Continues to Deliberate on Changes to its Credit Impairment Standard
Posted December 11, 2015 by CUNA Advocacy

The Financial Accounting Standards Board (FASB) is in the final stages of reviewing a proposed standard that would drastically change the accounting method for assessing credit impairment. The proposal would require a forward-looking “current expected credit loss”—or CECL—model instead of the current “incurred loss” approach. We have learned that FASB is still working through technical issues and has pushed the date of a vote on the standard from December to January. FASB is still on track to publish the final standard in the first quarter of next year.

In addition, yesterday, FASB Chairman Russell Golden made several interesting comments during his speech at an AICPA conference. In his remarks, Golden addressed the following misconceptions he is hearing with regard to the impairment proposal:

  • The new standard will require businesses to develop and install costly, complex new systems.
  • Bank examiners will take a more conservative view.
  • The credit crisis involved only large banks.
  • The standard takes an unrealistic view of the economics of loan financing.

While we hope these are simply “misconceptions,” we continue to have serious concerns with the proposal and urge FASB to refrain from finalizing it in its current form. In addition to the formal comment letter we filed with FASB during the open comment period, we sent a follow up letter in August of last year and most recently in February of this year to reiterate the concerns of credit unions regarding the proposal. In addition to letters, in the spring of 2013, we met with Chairman Golden here at CUNA to ensure he and his fellow board members know exactly where CUNA and credit unions stand on the proposal. Last summer, CUNA staff and the chair of our Accounting Subcommittee, Julie Renderos of Suncoast Schools Credit Union, were invited to and participated in an all-day FASB workshop on the proposal at FASB’s headquarters in CT. The workshop provided us with another opportunity to make sure FASB staff and board members are aware of our specific concerns with the proposal.

In addition to FASB, we are pressuring NCUA to minimize the effects of the standard. In June, we sent NCUA Chairman Matz a letter urging the agency to recognize the significant impact the FASB standard is likely to have on credit unions and instruct field examiners to make the appropriate adjustments in assessments of capital adequacy to minimize the negative impact. We reiterated our concerns directly to Matz during NCUA’s Open Forum held early last month.

Lastly, working with the Independent Community Bankers of America, we are urging Members of the House of Representatives to sign on to a letter to Chairman Golden authored by Congressman Scott Tipton and Congressman Patrick Murphy. The letter, which is still gaining support, asks FASB to pause its current work on the standard and thoroughly evaluate the potential harm the rule change will have on financial institutions’ ability to lend.