WASHINGTON–NCUA has joined with the FDIC, the Federal Reserve and the OCC in issuing a new policy statement on allowances for credit losses (ACLs).
The statement follows the elimination under revised accounting rules of recognition and measurement of troubled debt restructurings (TDRs) by creditors, and removal of references to TDRs,.
The agencies issued their original statement in May 2020 in response to changes to generally accepted accounting principles (GAAP) on accounting for credit losses that included the new Current Expected Credit Losses (CECL) methodology.
However, in March 2022 the Financial Accounting Standards Board (FASB) issued its Accounting Standards Update (ASU) 2022-02, titled “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” in which it eliminated the recognition and measurement accounting guidance for TDRs by creditors upon adoption, the agencies noted.
That led to the new statement.
“To maintain conformance with GAAP following the issuance of ASU 2022-02, the agencies are revising the original statement (of May 2020) to remove references to TDRs,” the agencies stated. “The agencies are also correcting a citation to a regulation in footnote 4 of the original statement. No other changes are being made to the original statement. Through this notice, the agencies are publishing the revised statement.
Additional Information
The updated statement continues to describe the measurement of expected credit losses under the CECL methodology and the accounting for impairment on available-for-sale debt securities in accordance with Topic 326; with the statement referencing the design, documentation, and validation of expected credit loss estimation processes, including the internal controls over these processes; the maintenance of appropriate ACLs; the responsibilities of boards of directors and management; and examiner reviews of ACLs.
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