ALEXANDRIA, Va.– With the effective date for CECL compliance approaching for most credit unions, the Simplified CECL Tool for credit unions has been updated for December 2022.
In an “NCUA Express” message to subscribers, the agency said the update includes the latest life-of-loan, or weighted average remaining maturity factors, as well as “minor enhancements.”
“For most credit unions, CECL will become effective January 1, 2023,” the agency said in the message. “For credit unions that plan to use the Simplified CECL Tool, the December release can be used to determine the day-one adjustment to undivided earnings, as required by CECL implementation guidance. For these credit unions, the day-one adjustment will be recorded effective January 1, 2023, and will be reported in the March 2023 Call Report.”
For CUs of Less Than $100 Million in Assets
According to the federal regulator, the Simplified CECL Tool was developed primarily for credit unions with less than $100 million in assets. NCUA said credit unions can use the tool using the new update and future quarterly updates to estimate their allowance for credit losses on loans and leases.
The agency added that that future quarterly updates will be issued before CUs submit call reports.
As NCUA states on its website, the CECL tool is designed to help credit unions adhere to the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 326 (Financial Instruments–Credit Losses). But while ASC 326 “allows entities to use judgment in determining appropriate and relevant information and estimation methods, a credit union’s management is responsible for ensuring the ACL conforms with [generally accepted accounting principles] and adequately covers risk.”
For additional info: Simplified CECL Tool
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