The effective date for the new Current Expected Credit Loss accounting standard, or CECL, has been extended, so now what?
Here’s what we know about the timeline and succession of CECL so far:
On July 17, 2019, the Financial Accounting Standards Board (FASB) unanimously voted 
to propose a deferral of Accounting Standards Update (ASU) 2016-13 for smaller reporting companies (SRC), private companies and not-for-profit institutions, including credit unions. To be eligible as an SRC, an entity must be an issuer as defined by the SEC and may not exceed established levels of public float, annual revenue, or both as defined by the SEC. Under the SEC definition, investment companies (including business development companies), asset-backed issuers, and majority-owned subsidiaries of a parent company that is not an SRC are not eligible for SRC status.
The vote, however, only authorized FASB staff to create an ASU exposure draft with the proposed amendments to CECL implementation dates. The draft was released for public comment and then revised, based on commentary received, to prepare for a vote of approval.
Fast forward to October 16, 2019, when the FASB Board reconvened to discuss the comments received on the proposed ASU. After much deliberation, the Board again unanimously voted to move forward with the amendments recommended in July.
The Board then directed FASB staff to draft a final ASU for vote by written ballot. As of November 15, the extension received yet another unanimous “yes” from the Board, and the implementation delay was approved.
The newly-approved ASU will result in the following:
Under the revised timeline, SEC filers (including credit unions) that do not meet the definition of a Small Reporting Company (SRC), are required to implement CECL by the original deadline of January 1, 2020. The CECL deadline for all other SRCs and credit unions is January 1, 2023.
Other important points of discussion from the October FASB meeting include:
- Whether or not the SRC designation is the best “cut line” between the two adoption dates.
- A response to the board’s inquiry for additional implementation activities and CECL workshops
The Board seemed to agree on the experimental value of the SRC cut line, as it allows for continued monitoring and the flexibility to either widen or narrow the line in the future.
In response to the Board’s follow up discussion on additional implementation activities, FASB staff noted that many of the CECL workshops have already begun, with more planned for the remainder of 2019 and into 2020 and beyond. The staff has also reported that the workshops have not produced any new or substantially different questions from those already addressed by existing FAQs.
To conclude, the proposed extensions of the CECL adoption have been finalized. Regardless of where your credit union’s mandatory implementation date may fall, CECL brings changes for everyone. If you haven’t already, now is the time to prepare your credit union for the transition.
Catalyst Strategic Solutions’ highly-skilled team of investment solutions professionals can help prepare your credit union for CECL implementation. To learn more about our broad portfolio of investment and ALM services, contact us today.