The NCUA, along with other federal financial regulators, issued an FAQ document on the new current expected credit losses (CECL) accounting standard. The standard was finalized in June, and CUNA sought assistance from the NCUA for credit union compliance shortly after.
The new standard uses an “expected loss” measurement for the recognition of credit losses. The final standard incorporated a number of CUNA-suggested improvements that ease the compliance burden on credit unions.
The FAQ document includes a summary the new standard’s effective dates, scope, transition and measurement approaches, and outlines certain steps that financial institutions are encouraged to take to prepare for the transition to the new accounting standard.
It also highlights areas within existing U.S. generally accepted accounting principles that will change, including:
The document also discusses initial supervisory views with respect to measurement methods, portfolio segmentation, use of vendors, scalability, data needs and allowance processes.