Disclosure Reports: Key items to produce
In July 2010, the Financial Accounting Standards Board (FASB) released a significant update, Accounting Standards Update 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” This update called for swift change surrounding disclosure requirements involving the credit quality of financing receivables and the allowance for credit losses. After understanding why the update was made, it is important to know what key data and reports must be produced as a result of this update. An excerpt from the whitepaper, 6 Key Items to Know About Disclosure Reports, is included in this post.
New disclosures & updates to existing ones
There are several items that must be produced as part of the new reporting requirements, including both new disclosures and updates to existing disclosures.
1. Credit quality indicators by loan class, either using a single indicator or a combination of risk grade, risk profile or performing vs. nonperforming.
2. Aging of past due loans by loan class.
3. An in-depth Troubled Debt Restructuring (TDR) report by loan class for occurrences during the reporting period.
4. A report of TDR defaults in the past 12 months by loan class and their impact on the allowance for loan and lease losses (ALLL).
5. A listing of significant loan purchases and sales of loans separated by portfolio segment.
Updates to Existing Disclosures:
1. Roll-forward schedule for the allowance for credit losses should now be disaggregated on the basis of loan class.
*As of 3/31/2013, institutions greater than $1 billion in total assets are required to complete a new Call Report Schedule RI-C, which disaggregates ALLL data by general loan categories.
2. For each of these disaggregated balances, each corresponding loan’s total recorded investment must be listed out.
3. The nonaccrual status of loans by loan class.
4. Impaired loans by loan class with and without reserve required; required to also disclose Interest Income recognized and Average Recorded Investment by loan class.
For more information on the update, and for additional examples of the above requirements, download the whitepaper: 6 Key Items to Know About Disclosure Reports. Slides and a recording of a recent webinar, “ALLL” About Disclosure Reports: 6 Key Issues to Know, are also available here.