NCUA issues letter on update to allowances for credit losses

NCUA issued a Letter to Credit Unions (23-CU-04) with a revised Interagency Policy Statement on Allowances for Credit Losses. The revision removes references to Troubled Debt Restructurings (TDRs). 

The policy statement describes the measurement of expected credit losses in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 326 and includes processes for the design, documentation, and validation of expected credit losses. 

It also addresses internal controls over these processes, the maintenance of appropriate allowances for credit losses, the responsibilities of boards of directors and management, as well as examiner reviews of allowances for credit losses. 

This policy statement is effective at the time of each credit union’s adoption of FASB ASC Topic 326.