I have some good news and some bad news for those of you working yourself into a panic over the Federal Accounting Standards Board proposal on accounting for Current Expected Credit Loss. The bad news is that the FASB decided to go forward with the proposal and expects a final standard to be issued in June. The good news is that the FASB decided to delay by a year, until December 2020, the compliance deadline.
In addition a sharply divided board also decided to scale back a requirement that financial institutions disclose credit quality indicators by year of origination. Specifically, as explained by FASB board member Hal Schroeder, “Current GAAP requires banks to disclose “credit-quality indicators” for each class of loans. The new requirement would further disaggregate those disclosed amounts by year of origination (or vintage).”
Community banks and credit unions argued that such detailed break downs are not necessary for smaller thrifts that don’t have large institutional investors. They argued that members in credit unions and investors in traditional thrifts are already familiar with their institution’s finances. The Board agreed yesterday so now you won’t have to disaggregate and disclose data. This is a small narrow but important exception but it doesn’t exempt credit unions from complying with CECL.continue reading »