FASB Tentatively Approves Amendments to ‘CECL’

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On Oct. 24 the Financial Accounting Standards Board (FASB) tentatively approved amendments to its current expected credit losses (CECL) standard.

The changes amend the effective date of the standard for non-public business entities (PBEs), changing it to fiscal years beginning after Dec. 15, 2021, and including interim periods within those years. Both state and federally chartered credit unions are considered non-PBEs.

As originally adopted (for non-PBEs) the standard would have become effective in fiscal years beginning after Dec. 15, 2020, and interim periods within fiscal years beginning after Dec. 15, 2021. The transition guidance would require an entity to make a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the amendments are effective.

Stakeholders raised questions about whether it was FASB’s intent to require non-PBEs to effectively adopt the amendments as of Jan. 1, 2021 because of the cumulative-effect adjustment as of that date, and whether it was the board’s intent to require the same effective date for non-PBEs and public business entities that do not meet the definition of a Securities and Exchange Commission filer.

In response, FASB intends to amend the Accounting Standards Codification, paragraph 326-10-65-1(a)(3) as follows: “For all other entities, including not-for-profit entities within the scope of Topic 958 and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.”

Following a formal board vote, FASB staff will incorporate the changes into the accounting standard, which should be finalized and made public in mid to late fourth-quarter.

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