Update on FASB and IASB models: Convergence?
Given that bankers and even Comptroller of the Currency Thomas Curry have gauged the CECL model, as it stands in current proposals, could increase bank reserve levels by 30-50 percent, the FASB’s proposed current expected credit losses (CECL) model has garnered much attention.
The latest on CECL, information coming from the AICPA Conference on Current SEC and PCAOB Developments, now hints that the CECL model could undergo changes, as a result of the FASB’s attempt at convergence with the IASB.
According Todd Sprang, CPA and principal at CliftonLarsonAllen LLP, an attendee at the conference, “Based on the remarks of FASB Technical Director Susan Cosper at the AICPA SEC Conference, it appears as if FASB intends to discuss alternatives to the CECL model and pursue convergence discussions with the IASB in the near term, with the goal of issuing a final standard during 2014. Currently the IASB model recognizes lifetime losses on loans only after significant deterioration has occurred and 12 months of expected losses on all other loans whereas the FASB model recognizes lifetime losses on all loans. In order to issue a converged standard in the next 12 months, the FASB and IASB will need to resolve this core difference in modeling which can significantly impact ALLL levels.”
For more information on the FASB’s CECL model and the differences between it and the IASB proposal, download FASB vs. IASB Proposals: Can’t We “ALLL” Just Get Along?
