WASHINGTON—The Financial Accounting Standards Board (FASB) met this week to discuss targeted improvements to the current expected credit loss (CECL) standard, while NAFCU continues to press the organization to exempt credit unions.
Of note, the board discussed the reconsideration of troubled debt restructuring (TDR) accounting for CECL adopters and possible alternative methods, NAFCU said.
During the meeting, the board voted to move forward with eliminating troubled debt restructuring (TDR) recognition and measurement guidance from GAAP for those creditors that have adopted the Current Expected Credit Losses accounting standard. To offset the elimination of TDR accounting, the board also voted to move forward with disclosure enhancements related to modifications made to borrowers experiencing financial difficulty.
To finalize these amendments, the board will issue a proposed Accounting Standards Update on the two measures for vote by written ballot. The update will include a comment period of 30 days, NAFCU noted.
NAFCU Pushes for Exemption
In addition, NAFCU President and CEO Dan Berger wrote a letter to Financial Accounting Standards Board (FASB) Chairman Richard Jones asking FASB to exempt all non-public filers, including credit unions, from compliance with the current expected credit loss (CECL) standard. CECL has a compliance deadline of January 2023. "NAFCU has consistently called on FASB to exempt credit unions since the adoption of the CECL standard and now, given the challenges posed by the pandemic, the lack of resources available to smaller institutions, and the fast-approaching deadline, NAFCU requests that FASB exempt all non-public filers from compliance with CECL in 2023," wrote Berger.
In the letter, Berger again wrote there are negative effects on credit unions in adopting CECL that have been exacerbated by the coronavirus pandemic.
"Given the continued threat of economic uncertainty and credit unions’ conservative tendencies, CECL’s forecasting requirement would likely to lead to upwardly-biased loss estimates," wrote Berger. "This could severely tighten credit conditions and reduce access to credit, which could disproportionately affect low- and moderate-income individuals most impacted by the COVID-19 pandemic." Berger also called on FASB to provide credit unions and other non-public filers an exemption from the standard or, at the very least, in absence of an exemption commit to providing more resources and assistance to credit unions.