ALEXANDRIA, Va. (5/31/13, UPDATED 5:30 p.m. ET)--National Credit Union Administration Chairman Debbie Matz urged the Financial Accounting Standards Board (FASB) to strongly consider how proposed credit impairment recognition changes could impact small- and medium-sized credit unions, and their ability to serve members of modest means, in a Friday letter to the board.
Matz said the compliance costs that this proposal could create are a particular concern for the agency. The NCUA also has safety and soundness concerns regarding the proposal, she added.
FASB has proposed an accounting standards update regarding financial reporting of expected credit losses on loans and other financial assets held by financial institutions, including credit unions. The proposed model would utilize a single "expected loss" measurement for the recognition of credit losses. It would replace the multiple existing impairment models in U.S. generally accepted accounting principles that generally use an "incurred loss" approach.
Under the proposal, the reporting entity would be required to estimate the cash flows that it does not expect to collect, using all available information, including historical experience and forecasts about the future.
The Credit Union National Association welcomed the NCUA's letter to FASB. Earlier this week CUNA urged FASB to drop its proposal, calling it "the most critical regulatory concern credit unions have faced in quite some time, including rules or proposals that have been issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act."
The Monday issue of CUNA's News Now will provide more detail on the NCUA letter.