NORWALK, Conn. (11/12/15)--The Financial Accounting Standards Board (FASB) expects to publish a final credit impairment proposal in early 2016. CUNA strongly opposes the proposal, and has raised a number of concerns with the proposal, both to FASB and to the National Credit Union Administration.
The FASB voted at its Wednesday meeting to set the effective date of its planned guidance on measuring credit losses. The new credit losses standard will require a forward-looking “expected loss” approach instead of the “incurred loss” approach in effect today. The board expects to publish a final accounting standards update on credit losses in early 2016.
Non-public business organizations--including private companies such as credit unions, not-for-profit organizations, and employee benefit plans within the scope of FASB guidance on plan accounting--will be required to apply the guidance for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
CUNA believes this is likely to have a “significant, detrimental impact on a number of credit unions and their members,” CUNA wrote to FASB in three comment letters submitted over several years, urging FASB to exempt credit unions from the proposed changes.
“This unwarranted increase to many credit unions’ ALLL accounts would directly result in a reduction in their retained earnings,” CUNA’s Aug. 21 letter reads. “A decrease in retained earnings can lead to a reduced capital ratio, which could trigger prompt corrective action (PCA) implications for numerous credit unions that currently do not have PCA concerns.”