FASB to hold roundtable on CECL

Dec 24, 2015

The Financial Accounting Standards Board (FASB) will hold a roundtable discussion on its current expected credit loss (CECL) model during the first quarter, even as staff members continue preparations for finalizing the standard in early 2016.

“We don’t yet have the details, but expect to announce them sometime in early January 2016,” FASB spokeswoman Christine Klimek told Sageworks in an email.

The focus of the roundtable discussion will be small community banks, she added, and speakers will include representatives of that community.

“In the past, we have done roundtables on other accounting topics to better understand the views of our stakeholders,” she said.

Earlier this week, the FASB continued discussing the proposed standard for accounting for credit losses, making a couple of decisions related to purchased credit-impaired assets. The board agreed that when using a method to estimate the allowance for credit losses that does not discount future expected cash flows, an entity should base the allowance on the par amount of the purchased credit-impaired asset. It also agreed that when using a method to estimate the allowance for credit losses that discounts future expected cash flows, an entity should use the discount rate that equates the purchase price of the impaired asset with the present value of estimated future cash flows. While the board held some discussion on requiring the use of a discounted cash flow approach to measure expected credit losses on these types of assets as of the date they are acquired, members decided against requiring the use of a specific method for the estimate, either initially or on subsequent measurement dates.

The board also discussed how to treat premiums and discounts. “The board decided that an allowance for credit losses measured using a method that does not discount future expected cash flows should reflect expected credit losses of the amortized cost basis of the financial assets, including premiums and discounts,” according to a FASB statement that contained additional details on its decisions.

Klimek said the staff still plans to bring to the board a cost-benefit analysis and to seek through a ballot vote permission to start finalizing the standard. “Once board members have signed off on the ballot …, the final standard is sent to production so it can be published and incorporated into the FASB Codification,” she said.

As for the timeline for implementing CECL, the FASB has agreed most U.S. financial institutions would be required to utilize the proposed current expected credit loss model, or CECL, beginning in 2019. Smaller banks would have an additional year to shift from the incurred-loss model, based on an expected release date of first quarter 2016 for the final standard.