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FASB: No Delay for CECL Implementation Date

Abrigo
February 11, 2022
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Firm deadline for CECL implementation set

As expected, the FASB agreed to uphold CECL’s 2023 implementation date.

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FASB Board Decision
No More CECL Delays

Current expected credit loss (CECL) implementation won’t be delayed again, the Financial Accounting Standards Board (FASB) has decided, leaving smaller SEC registrant and private financial institutions a 2023 deadline for adopting the critical accounting standard.

Earlier this month, the FASB considered and rejected further deferral of the CECL standard, initially issued in 2016 in response to the 2008 global financial crisis. The decision appears to mark the board’s final word on ongoing petitions from community banks and credit unions who asked for a delay or total exemption.

The original CECL effective date was January 2020, but implementation was delayed twice to ensure companies had sufficient time to obtain better data, build more robust internal controls, learn from results of SEC filers, and perhaps approach CECL implementation as a business solution.

Petitioners argued that the non-public entities with no shareholders should be excluded, since an original goal of CECL was to provide investors with more helpful information. Other concerns cited in the Feb. 2 FASB meeting were the complexity of some aspects of CECL, “onerous data collection” requirements, and capital implications.

'One industry; one accounting standard'

While the board members were sympathetic to the limited resources of smaller institutions, they cited the importance of a consistent standard across the financial industry in their decision and ongoing efforts by the FASB and regulators to provide Q&As, webinars, methodology best practices, and simplified approaches to CECL to assist in the transition. The board also highlighted institutions’ ability to use peer data, making CECL scalable for smaller financial institutions.

With the resources available and the rationale for the standard intact, a majority of board members agreed, the deferral was unnecessary, would only delay the inevitable, and create more uncertainty when it came to implementing changes. 

Stay up to date with the latest CECL resources.

The FASB members voted 5-2 against delaying the effective date for a third time or exempting non-public entities. Their decision means that all financial institutions, including small public companies, privately held banks, and credit unions, must adopt the standard for fiscal years starting after Dec. 15, 2022 (effectively, by January 1, 2023, for most institutions).

“It’s one industry; we need one accounting standard for credit,” said FASB member Fred Cannon during the discussion. “Whether they’re credit unions, community banks, private fintech firms, or larger financial institutions, [financial institutions] are all vying for the same customers. They’re competing with the same products and similar services and taking similar risks, and so they need to be on one accounting standard.”

Where to Begin
Next steps for CECL transitioners

Financial institutions that waited to begin adapting to the new regulations may find the thought of eleven months until compliance intimidating. The good news is that in the six years since CECL was announced, the number of resources available to institutions has increased considerably, especially considering the CECL lessons learned by SEC registrants.

Whether your institution is building or buying software, there are resources available to help identify major steps and milestones and feel confident in your institution’s CECL transition. If you are looking for a starting point, register for Abrigo’s CECL Streamlined Webinar Series to help your institution stay on track with implementation.

About the Author

Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo’s platform centralizes the institution’s data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth. Make Big Things Happen.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

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