ALLL Disclosure Reporting
Following the Great Recession, the Financial Accounting Standards Board (FASB) released Accounting Standards Update 2010-20. This update required institutions to overhaul their disclosure processes surrounding the credit quality of financial receivables and the allowance for credit losses.
The goal of this update is for financial statement users at financial institutions (inclusive of the board of directors, investors, regulatory agencies, auditors, competitors, purchasers and partners) to better recognize credit weaknesses in an institution’s loan portfolio.
In addition to updates to previous disclosures, ASU 2010-20 mandates that the following reports must be produced on an annual basis:
- Credit quality indicators by loan class, whether that is one or a combination of risk grade, risk profile or performing vs. nonperforming
- Aging of past due loans by loan class
- In-depth Troubled Debt Restructuring (TDR) report by loan class for occurrences during the reporting period
- Report of TDR defaults in the past 12 months by loan class and their impact upon the ALLL
- Listing of significant loan purchases and sales of loans separated by portfolio segment
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