CECL proposal unlikely to provide true relief to CUs

Credit Union National Association filed a comment letter with the Financial Accounting Standards Board (FASB) regarding its Targeted Transition Relief proposal, which is intended to ease transition to the current expected credit losses (CECL) standard by providing the option to measure certain types of assets at fair value.

As credit unions continue to struggle with implementing the “expected loss” measurement for the recognition of credit losses, CUNA has expressed concerns with its effect on the financial standing of credit unions and the compliance burden it already presents.

In its letter, CUNA told FASB that proposed changes to the current CECL standard are unlikely to be adopted by credit unions and urged the agency to explore other relief measures for credit unions.

The proposal would allow preparers to irrevocably elect the fair value option for eligible financial assets measured at amortized cost basis upon adoption of CECL. CUNA agrees with FASB, and Cornerstone Credit Union League supports their position that the proposed change is likely to increase the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for those financial statement preparers while providing more useful information to investors and other users.

“CECL is intended to address delayed recognition of credit losses resulting in insufficient funding of the allowance accounts of certain covered entities," the letter reads. "However, underfunding of allowance accounts has not generally been an issue for credit unions. Further, the typical user of a credit union’s financial statements is not a public investor—such as with large, public banks—but instead is the credit union’s prudential regulator, the National Credit Union Administration.”

“We support CUNA’s efforts to ease the transition to CECL," said Cornerstone Credit Union League Chief Government Relations Officer Jim Phelps. "Credit unions are already inundated with compliance burdens and applying CECL to credit unions doesn’t make sense. The Cornerstone League is committed to working with credit unions of all asset categories as they work through this transition.”    

Read the letter in full here.