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New Guidance Aimed at Helping Credit Unions Prepare for CECL
Wednesday, December 21, 2016 6:55 AM

The National Credit Union Administration and federal bank regulatory agencies have jointly published Q&As to assist financial institutions and examiners with a new accounting standard issued by the Financial Accounting Standards Board (FASB) earlier this year. This new accounting standard introduces the current expected credit losses methodology (CECL) for estimating allowances for credit losses. The effective date of the new credit losses standard depends on the credit union's characteristics.

The guidance addresses the following issues, among others:

  • Summarize key elements of the new accounting standard, focusing on such concepts as effective dates, scope, transition, and measurement approaches.
  • Highlight areas within existing generally accepted accounting principles that will change with the new accounting standard, including purchased credit-deteriorated financial assets, held-to-maturity debt securities, available-for-sale debt securities, troubled debt restructuring, and off-balance-sheet credit exposures.
  • Discuss initial supervisory views with respect to measurement methods, portfolio segmentation, use of vendors, scalability, data needs, and allowance processes.
  • Outline certain steps that financial institutions are encouraged to take to prepare for the transition to the new accounting standard.

For tips to prepare for implementation and examiners are available here.