WASHINGTON–A Financial Accounting Standards Board meeting here included a focus on possible issues that may arise when organizations implement the "current expected credit loss" accounting standard and discussed acceptable methods for determining the estimated life of a credit card receivable, according to NAFCU, which was in attendance as the FASB meeting.
NAFCU Regulatory Affairs Counsel Ann Kossachev attended the meeting of FASB's Transition Resource Group meeting, along with Doug Wright, chief financial officer at Mission Federal Credit Union, who is member of the TRG.
According to NAFCU, during the meeting the TRG discussed five issues:
- Discounting expected cash flows at the effective interest rate
- The scope of purchased financial assets with credit deterioration (PCD assets) for beneficial interests
- Transition guidance for transitioning pools of purchased credit impaired (PCI) assets to PCD assets
- Accounting for troubled debt restructurings (TDBs)
- Acceptable methods for determining the estimated life of a credit card receivable
According to NAFCU, “On the final item, which is of significance to credit unions, the TRG debated the merits of two different views about how to determine the ‘estimated life’ of a credit card receivable for assessing credit losses under the FASB guidance. Both views apply the CARD (Credit Card Accountability Responsibility and Disclosure) Act, but under the second view, projected future cardholder draws should be considered in applying forecasted expectation payments. Several of the TRG members questioned whether this second view should even be allowed because it appears to be inconsistent with the CECL standard.”
NAFCU reported no amendments were adopted during the meeting, but FASB will continue its evaluation of the discussion.