FASB Proposes CECL Deadline Modification for Non-Public Banks and Credit Unions
On Wednesday, July 25th the Financial Accounting Standards Board (“FASB”) clarified its original intent in ASU 2016-13, which was to provide an extra year to implement the Current Expected Credit Losses (“CECL”) standard for banks that are not SEC filers or qualify as public business entities (“private banks”). Based on the clarification, private banks that are calendar year-end companies are now required to adopt the standard on January 1, 2022, if approved, as opposed to adopting on January 1, 2021. Previously, the interpretation of the CECL standard was to be effective for private banks beginning on December 31, 2021 (for banks with calendar year-ends). While this may seem like a small delay from December 31, 2021, to January 1, 2022, the importance resides with the adjustment to retained earnings, which occurs at the beginning of the year of implementation.
If the proposed ASU is passed, the effective dates for SEC filers and banks that classify as public business entities will remain unchanged with SEC filers required to adopt CECL for fiscal years and interim periods beginning after December 15, 2019, and public business entities (that are non-SEC filers) required to adopt CECL for fiscal years and interim periods beginning after December 15, 2020.
FASB has directed its staff to draft a proposed accounting standards update for vote by written ballot with a 30-day comment period, at which point it may ultimately be adopted if it passes.
This is not intended for private banks and credit unions to postpone the implementation process. Banks should continue on their given route of compiling data, implementing controls and documenting the process. This should be interpreted as additional time put on the final touches.
If you have questions regarding CECL implementation or whether or not your institution qualifies as a public business entity, please reach out to a member of our financial institution team.
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