FASB to outline CECL effective dates

Nov 5, 2015

The Financial Accounting Standards Board (FASB) on Nov. 11 will outline effective dates for its proposed current expected credit loss model, or CECL – a move that will give financial institutions their first official view of the possible timeline for implementing the model’s sweeping changes.

Board spokeswoman Christine Klimek told Abrigo that members will also discuss at the meeting implementation timelines for two other, major proposed updates to the accounting standards: Leases (Topic 842) and Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

The three proposals are major updates, so reviewing implementation timelines for all three at the same time may provide better coordination, Klimek said. She was unable to comment on any proposed timeframe that will be up for discussion, but industry insiders have been estimating the FASB would have banks begin implementing CECL in 2018. Fed officials on a conference call last week with accountants, consultants and vendors to the financial services industry, however, said they suspect it’s more likely to be in the 2019 or 2020 timeframe.

The FASB recently estimated it would issue the final version of the CECL model in the first quarter of 2016.

At the Nov. 11 meeting, Klimek said, the FASB is expected to discuss one issue raised in recent months as the FASB solicited input from external reviewers on the transition from the incurred loss model. That issue is related to troubled debt restructurings, or TDRs. Some industry participants and advisors have argued proposed changes to accounting for troubled debt restructurings (specifically relating to the cost-basis adjustment and consideration of prepayments) would be costly and would increase financial statement complexity.

Otherwise, the meeting agenda remains fluid at this point. Staff might provide a summary of comments generated by the external review, but it is unclear whether remaining issues raised during the “sweep” process will be discussed, Klimek said. FASB staff previously said these discussions of “sweep issues” will provide the board an opportunity to re-consider any previous decisions before the final standard is issued.

In any case, it’s unlikely to be the last FASB meeting on Proposed ASU Financial Instruments—Credit Losses (Subtopic 825-15) before the body issues the final standard. Klimek said the board’s Nov. 23 meeting may also provide time for the FASB to discuss outstanding issues related to CECL. That’s a timeline in keeping with the FASB’s plan for issuing the final standard in early 2016.

The transition from an incurred loss model to an expected credit loss model is a major one with far-reaching implications for institutions’ risk management processes. Given the magnitude of the proposed changes, ALLL.com and Abrigo are hosting a comprehensive webinar on Thursday, Nov. 19 at 2 p.m. EST to help get financial professionals up to speed on the model and prepared for the final standard’s release.

This webinar will cover:
– The basic tenets and timeline of CECL
– Tangible examples of loss methodologies under CECL
– The latest news from industry experts, the Fed and the FASB
– What bankers should be doing now

Register for the webinar now.

Abrigo and ALLL.com are hosting a special early session of the presentation for credit unions at 11 a.m. EST. Register for the credit union session here.