{"id":15235,"date":"2021-01-22T15:05:10","date_gmt":"2021-01-22T21:05:10","guid":{"rendered":"https:\/\/sfwpartnersllc.com\/?p=15235"},"modified":"2021-01-22T15:05:10","modified_gmt":"2021-01-22T21:05:10","slug":"new-law-provides-option-to-delay-implementing-the-updated-cecl-standard","status":"publish","type":"post","link":"https:\/\/www.sfw.cpa\/news-and-guides\/new-law-provides-option-to-delay-implementing-the-updated-cecl-standard\/","title":{"rendered":"New Law Provides Option to Delay Implementing the Updated CECL Standard"},"content":{"rendered":"

<\/head><\/p>\n

<\/p>\n

The Consolidated Appropriations Act (CAA), signed into law on December\u00a027, 2020, includes a variety of economic relief measures. One such measure allows certain banks and credit unions to temporarily postpone implementation of the controversial current expected credit loss (CECL) standard. Here are the details.<\/p>\n

Updated accounting rules<\/strong><\/p>\n

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.\u00a02016-13, Financial Instruments \u2014 Credit Losses (Topic\u00a0326): Measurement of Credit Losses on Financial Instruments<\/em>, in response to the financial crisis of 2007\u20132008. The updated CECL standard relies on estimates of probable future losses. By contrast, existing guidance relies on an incurred-loss model to recognize losses.<\/p>\n

In general, the updated standard will require entities to recognize losses on bad loans earlier<\/em> than under current U.S. Generally Accepted Accounting Principles (GAAP). Originally, it was scheduled to go into effect for most public companies in 2020.<\/p>\n

This is the third<\/em> time the CECL has been delayed. In October\u00a02019, the FASB extended the deadlines for smaller reporting companies (SRCs) from 2021 to 2023, and for private entities and nonprofits from 2022 to 2023. In March\u00a02020, the CARES Act gave large banks the option to delay CECL reporting by a year.<\/p>\n

New delay<\/strong><\/p>\n

Under the CAA, large public insured depository institutions (including credit unions), bank holding companies and their affiliates have the option of postponing implementation of the CECL standard until the earlier of:<\/p>\n

\n
The end of the national emergency declaration related to the COVID-19 crisis, or<\/li>\n
December\u00a031, 2022.<\/li>\n<\/ul>\n
This is an extension from December\u00a031, 2020. Many public banks have already made significant investments in systems and processes to comply with the CECL standard, and they\u2019ve communicated with investors about the changes. So, some may choose not to take advantage of this option to delay implementation \u2014 but many banks will hold off.<\/p>\n
Congress decided to provide a temporary reprieve from implementing the changes for a variety of reasons. Notably, the COVID-19 pandemic has created a volatile, uncertain lending environment that may result in significant credit losses for some banks.<\/p>\n
To measure those losses, banks must forecast into the foreseeable future to predict losses over the life of a loan and immediately book those losses. But making estimates could prove challenging in today\u2019s unprecedented market conditions. And, once a credit loss has been recognized, it generally can\u2019t be recouped on the financial statements. Plus, there\u2019s some concern that the CECL model would cause banks to needlessly hold more capital and curb lending when borrowers need it most.<\/p>\n
Stay tuned<\/strong><\/p>\n
These are uncertain times, and the FASB may feel pressure from stakeholders to provide additional relief to help companies during the COVID-19 pandemic. Contact us for the latest developments on this issue or to help implement the new CECL model.<\/p>\n
\u00a9 2021<\/em><\/p>\n
<\/body>
\n<\/html><\/p>\n","protected":false},"excerpt":{"rendered":"
The Consolidated Appropriations Act (CAA), signed into law on December\u00a027, 2020, includes a variety of economic relief measures. One such measure allows certain banks and credit unions to temporarily postpone implementation of the controversial current expected credit loss (CECL) standard. Here are the details. Updated accounting rules The Financial Accounting Standards Board (FASB) issued Accounting […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,7,10],"tags":[8,11,12],"class_list":["post-15235","post","type-post","status-publish","format-standard","hentry","category-aa","category-articles","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=15235"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15235\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=15235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=15235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=15235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}