CECL Extensions One Step Closer to Final Approval

Regan Camp
October 31, 2019
Read Time: min

As CECL is implemented, the allowance for loan and lease losses, or ALLL, is being called the allowance for credit losses, or ACL.

The current expected credit loss, or CECL, effective dates have been extended for all but the larger SEC filing institutions, correct? Well…not quite yet.

It is true that on July 17, the Financial Accounting Standards Board (FASB) voted unanimously to propose a deferral of Accounting Standards Update (ASU) 2016-13, otherwise known as CECL, for smaller reporting companies (SRCs), as defined by the SEC, and for private and not-for-profit companies. This vote, however, simply authorized the FASB staff to develop an ASU exposure draft incorporating the proposed amendments regarding the effective dates for CECL. The draft would then be submitted for public comment, and the solicited comments would still need to be reviewed, considered, and, where deemed appropriate, incorporated into the ASU in preparation for a vote of final approval. 

Extension plans were affirmed

On Oct. 16, the FASB met to discuss the comments received on the exposure draft. Subsequent to deliberations throughout this meeting on the identified themes of feedback, the board once again voted unanimously in favor of pressing forward with the amendments as originally recommended in July so they can present the amendments for a final vote by written ballot. This moved us one step closer to the formal approval and issuance of the final ASU and, thus, closer to officially extending the effective date for many institutions. This final vote is anticipated in November, and at this point, the extension as proposed is expected to receive a unanimous vote in the affirmative. 

Under the revised timeline, SEC filers that do not fit the SEC’s definition of an SRC would still be required to implement CECL under the original deadline of January 2020, while the CECL deadline would be January 2023 for other public business entities, SRCs, and privately held banks and credit unions.

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FASB's points of discussion

A couple of noteworthy points of discussion pertaining to CECL took place during October’s FASB meeting. They included:

  1. Whether the SRC designation is the most appropriate cut line between the two adoption date buckets
  2. A follow-up on the board’s request for additional implementation activities that they wanted the staff to undertake regarding workshops for CECL

Regarding the SRC cut line, the board seemed to be in agreement on the currently proposed cut line of SRC as an initial “experiment,” as one board member suggested, while continuing to monitor and be open to expanding or narrowing this line in the future.

CECL workshops underway

As for the board’s follow-up on the encouraged additional implementation activities, the staff reported that multiple CECL workshops have already begun regionally, with others planned throughout the rest of this year and into 2020 and beyond. Furthermore, the staff asserted that these workshops have not resulted in any new, major themes of questions that haven’t already been addressed in available FAQs, signifying that the industry seems to be gaining a better grasp on the major concepts of the standard.

In conclusion, while the proposed extensions of the CECL adoption dates are not yet finalized, we’re slowly inching toward that final approval as the formal process plays out. In the meantime, regardless of when your financial institution’s mandatory adoption date falls, it’s imperative that each institution leverages what time it does have to prepare for CECL. Extension or not, the time for adoption will be here before we know it. 

About the Author

Regan Camp

Regan Camp is Abrigo’s Managing Director of Advisory Services, leading a team of subject matter experts who assist financial institutions in accurately interpreting and applying federal accounting guidance. He began his career in financial services as a commercial loan officer at a $2.1 Billion institution. He then worked with Deloitte and Touche in their federal advisory practice, represented the FDIC in managing the day-to-day operations and eventual liquidations of failed financial institutions, and managed private consulting teams in assisting financial institutions with the administration of FDIC Loss Share Agreements, the establishment of special asset divisions and the resolution of troubled portfolios. At Abrigo, he provides Advisory Services clients a unique combination of experience and perspective as he works closely with each institution to develop sound and defensible allowance methodologies, policies, and procedures. Regan is a nationally recognized speaker, writer, thought leader, and trusted advisor, specializing in the ALLL, the CECL standard, and credit risk. Regan earned his undergraduate degree from Brigham Young University, where he studied business management and finance.

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