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Today, the Financial Accounting Standards Board (FASB) voted on final changes to its accounting standard for determining credit impairment on loans and other financial instruments. At today’s meeting, the Board decided to push back by one year the effective date tentatively agreed on during a meeting last fall; the original proposal did not set forth a possible effective date. Following today’s decision, the impairment standard will be effective for credit unions (and other private companies) for annual periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. This is a big win for CUNA, which urged FASB to provide credit unions with at least three years (from issuance of a final standard) to comply with the changes.
In addition to the delayed effective date, FASB made several other positive changes to the standard since it was initially proposed three and a half years ago. In particular, during a meeting earlier this month, FASB announced changes that will provide 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. This is a major improvement that CUNA specifically advocated for in a March letter we sent with the Community Bankers of America (ICBA) to FASB Chairman Russell Golden. Also in March, CUNA initiated its Grassroots Action Center to urge credit unions to contact Golden directly with their concerns, resulting in over 1,000 individual letters sent to the standard-setter.
Understanding the significance of FASB’s proposed changes, CUNA has made it a top focus for the past several years. In 2013, we filed a formal comment letter with FASB during the open comment period, we then sent follow up letters in August of 2014 and February of 2015. In addition to letters, in the spring of 2013, we met with Chairman Golden to ensure he and his fellow board members know exactly where we and credit unions stand on the proposal. In the summer of 2014, our staff and the chair of our Accounting Subcommittee, Julie Renderos of Suncoast Schools Credit Union, participated in an all-day FASB workshop on the proposal, which provided us with another opportunity to make our voices heard by FASB.
Most recently, we attended a February FASB roundtable along with CUNA member Jeanne D'Arc Credit Union of Lowell, MA, represented by SVP & CFO Susan Hannigan. At the roundtable Hannigan highlighted the unique nature of credit unions, explaining to the group that without changes the standard may adversely affect credit unions ability to serve their members. In addition to FASB, on several occasions we pressed NCUA to minimize the effects of the standard. Lastly, earlier this year, we worked together with the ICBA to successfully encouraged 62 members of Congress to sign on to a letter by Representatives Tipton (R-CO) and Murphy (D-FL) to Chairman Golden, urging FASB to consider improvements to the standard.
Following today’s meeting, FASB staff will complete a “ballot draft” of the revised standard that will include all of the changes the Board has made to the original version of the proposal issued in 2012. Once the Board has reviewed the ballot draft and is satisfied that it reflects its intentions, the draft will be submitted for final publication. FASB expects to publish the updated standard in June.
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