A trade group representing credit unions is expressing concerns over upcoming standards from the Financial Accounting Standards Board on credit losses.
“We filed a formal comment letter with FASB in May of last year,” Mary Dunn, deputy general counsel of the Credit Union National Association, informed CUNA’s members in a weekly “Regulatory Advocacy Report,” concerning the additional reporting requirements that might come from the new FASB credit loss standards. “Our most recent communication was another letter last month that also strongly opposes the proposal. While FASB has not indicated when it will finalize the proposal, we anticipate action before the end of the year. The New York Times indicated recently that FASB’s decision could be imminent.”
FASB parted ways with the International Accounting Standards Board in how to treat credit losses, and the IASB finalized its own financial instruments standards last month under International Financial Reporting Standards (see
Dunn informed CUNA’s members that FASB’s proposal would implement the CECL (current expected credit loss) approach for determining credit impairment. “This contrasts with the current method because instead of using information on past performance the CECL model would require reporting entities, including credit unions, to estimate the present value of cash flows associated with all loans and other assets that are not expected to be collected over the life of the loan or asset,” she wrote. “In addition, the proposal would remove the triggering event for realizing whether a particular asset has become impaired.”
CUNA is also worried that a proposal from the National Credit Union Administration would make FASB’s approach even worse. “In addition, we are concerned that NCUA’s risk-based capital proposal will exacerbate the negative effects of the FASB proposal,” said Dunn. “We will certainly provide more information on the proposal as it becomes available.”
