Removing Barriers Blog

FASB Issues Improved Final Standard on Credit Impairment
Posted June 16, 2016 by CUNA Advocacy

Today, the Financial Accounting Standards Board (FASB) issued its long-anticipated final standard on credit losses, referred to as the CECL (current expected credit losses) model. The final standard, which was approved by the Board in April, includes several important, CUNA-backed improvements from the proposal, which will make compliance more manageable for credit unions. 

The final standard delays the effective date by a year from the date tentatively agreed to during last fall's meeting. 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. 

Another major improvement is the additional flexibility the standard affords covered entities. Specifically, as described in the standard’s supplementary information, the changes will not require complex modeling and will allow for various estimation methods. FASB’s intent is for each institution to apply the method that is appropriate for its portfolio, based on the knowledge of its business and processes. This is a major improvement that we specifically pushed for in our March letter

While we continue to disagree with FASB’s decision to apply the new standard to credit unions, we recognize that the final standard does reflect some of the input we provided. We will be closely analyzing the standard with our Accounting Advisory Committee in the coming weeks.