WASHINGTON--Several years after it implemented the current expected credit loss (CECL) accounting standard, the Financial Accounting Standards Board (FASB) conducted a roundtable Tuesday to review how the standard is working.
The CECL accounting standard took effect in January 2023 for credit unions. It requires covered entities to account for expected credit losses, instead of the incurred losses of the previous standards.
During the meeting NCUA Chief Accountant Chris McGrath noted that CECL has helped credit unions take a fresh look at credit losses and develop more robust analysis, but he also highlighted the need for additional practical options to reduce the burden for smaller credit unions. McGrath also emphasized that flexibility can be difficult in practice when credit unions are concerned about being challenged by auditors, examiners, or other stakeholders. Clearer guidance or practical expedients could help smaller credit unions use simpler approaches with greater confidence, he noted, America's Credit Unions reported.
As CUTday.info reported, Federal Reserve Vice Chair for Supervision Michelle Bowman raised broader concerns about CECL’s cost and complexity for smaller banks and suggested that FASB consider repeal, exemption, or other relief for smaller banks.
Other presenters raised concerns that the standard adds significant cost, complexity, and documentation burdens, particularly for smaller financial institutions.
FASB staff indicated it will summarize the roundtable’s feedback for the FASB Board, which will then consider whether any additional action is appropriate as part of the ongoing review.