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FASB Adjusts CECL Deadline by One Year
Friday, August 10, 2018 6:40 AM

The Financial Accounting Standards Board is proposing to modify the effective date of its Current Expected Credit Losses standard for non-public companies, giving many private banks and credit unions an extra year to get ready for the new rules, even though the effective date is technically only changing by one second past midnight.

At a meeting Wednesday, FASB clarified its original intent to provide nonpublic companies with an extra year to implement the standard, according to FASB spokesperson Christine Klimek. Nonpublic companies that are calendar year-end companies are now required to adopt the standard on Jan. 1, 2022, whereas because of the technical language in the transition they would have been forced to adopt on Jan. 1, 2021, even though it was for the “annual period” given the requirement to make the adjustment at the beginning of the year.

FASB says it isn’t actually a delay. Instead, it is characterizing the change as the FASB board clarifying its original intent.

Credit Union National Association wrote to FASB in May urging it to clarify CECL’s effective date for credit unions. During Wednesday’s meeting, FASB Chairman Russell Golden agreed with comments in CUNA’s letter that FASB originally intended to provide credit unions and similar types of entities additional time to implement the standard. While FASB staff has not yet released the details of the proposed change, based on discussion during the meeting, CUNA said it expects the clarification will fully remedy the issue.

CECL was adopted in June 2016, and uses an “expected loss” measurement for the recognition of credit losses, CUNA pointed out. FASB intended to create tiered effective dates to provide implementation flexibility for smaller and less complex financial institutions, a move CUNA supported.

Read more at Accounting Today.