The Financial Accounting Standards Board (FASB) has officially issued an update to its current expected credit losses (CECL) standard, delaying implementation for credit unions for fiscal years beginning after December 2021. CUNA strongly pushed for the delay for help credit unions come into compliance.
Specifically, the update from FASB mitigates transition complexity by requiring non-public business entities (which includes credit unions) to implement it for fiscal years beginning after Dec. 15, 2021, including interim periods within those fiscal years.
This is a delay of one year, as non-PBEs would have originally been required to implement the standard for fiscal years beginning after Dec. 15, 2020.
This aligns the implementation date for their annual financial statements with the implementation date for their interim financial statements.
CUNA believes the change in effective date will not only provide much needed additional time for credit unions to implement system updates but will also reduce confusion, particularly for those entities required to adopt in the fourth quarter.
CUNA has also called for FASB to examine options to provide credit unions with relief for the proposal, and CUNA has reached out to NCUA and FASB for potential avenues toward this relief.
FASB approved the changes in October. CECL, adopted in June 2016, uses an “expected loss” measurement for the recognition of credit losses.
The update also clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard.