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FASB Decides on Proposed Updates

On February 2, 2022 the Financial Accounting Standards Board met on the proposed updates related to the CECL adoption timeline, the elimination of the recognition and measurement of troubled debt restructurings for creditors that have adopted CECL, the vintage disclosure enhancements, and PCD terms and their gross up treatment.

1. CECL

The Board voted on CECL and there will be no more delays. The last and largest cohort of adopters will need to implement CECL in 2023. Need to get caught up? Contact Valuant to reveal how we can implement a CECL solution for you in just days.

2. Vintage Disclosures

A final update will be drafted on vintage disclosures which will require current period gross charge offs by year of origination but will NOT require recoveries or cumulative write-offs. Effective date is fiscal year end after 12/15/2022. Early adoption will be permitted.

3. Troubled Debt Restructurings

A final update will be drafted to eliminate TDR accounting within the Allowance for Credit Losses in lieu of more disclosures related to modifications upon the adoption of CECL. Effective date is fiscal year end after 12/15/2022. Early adoption will be permitted.

4. PCD Gross Up

The Board voted that the PCD term is going away, but the gross up relief framework and ongoing accounting will be applied to most acquired assets. Scope exceptions will include AFS debt securities, credit cards, revolving lines, and In-Substance Originated (ISO). The FASB board will continue to deliberate the details but they have successfully heard concerns from stakeholders and have eliminated the majority of the “double count” of expected losses within fair value accounting combined with the establishment of the ACL that is a part of current GAAP for non-PCD acquired assets. Stay tuned for further deliberations including details on ISO, terminology, presentation, and transition impacts.

For more information, contact our team of over 65% CPAs, CFAs, PhDs, and former auditors.

You can also read the FASB meeting minutes here.

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As part of an annual study that began in 2020, Valuant conducts analysis on ASC 326, commonly referred to as “CECL”. The study contains key data statistics and insights around the US Regional and Community Banking sectors and the impact CECL has on their Allowance for Credit Loss (ACL) Coverage Ratios.

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