WASHINGTON–CUNA is asking NCUA for reassurances the agency will provide assistance with implementation of Accounting Standards Update No. 2016-13, Financial Instruments–Credit Losses, which was recently issued by the Financial Accounting Standards Board (FASB).
“As NCUA is aware, the standard will have a direct—and in some instances dramatic—effect on all credit unions,” CUNA CEO Jim Nussle said in a letter to the agency.
CUNA expressed appreciation for NCUA’s efforts to date, including a statement by the agency that
institutions will be permitted to “apply judgment in developing estimation methods that are appropriate and practical for their circumstances,” as well as, “smaller and less complex institutions will be able to adjust their existing allowance methods to meet the requirements of the new accounting standard without the use of costly and complex models.”
In its letter, CUNA noted that while previous statements have indicated that the agencies will be developing implementation guidance, it wants NCUA to detail its plans for developing guidance specific to credit unions.
CUNA also called on NCUA to develop a public framework for how it will assist credit unions as they begin to prepare for implementation of the new standard, including a timeline of when the agency will release detailed compliance resources, such as credit union-specific examples and Q&As. It further wants NCUA to establish an implementation task force, comprised of accounting experts from credit unions of all asset sizes from across the country.
Finally, CUNA said that while the proposal will in no way change today’s economic reality, it will result in lower apparent capital ratios at credit unions and banks.
“Therefore, we urge NCUA to work with its Office of Examination and Insurance to instruct examiners to make the appropriate adjustments in assessments of capital adequacy in order to minimize the negative impact on credit unions,” Nussle wrote. “To illustrate this, assume under the new accounting requirements a credit union’s net worth ratio falls by 50 basis points. In such an instance, an examiner who otherwise might have suggested, for example, a 9% net worth ratio should now be satisfied with 8.5%.”