FASB Proposes Extension of CECL Deadline for Most Financial Institutions, Issues Updated Q&A

By Baker Newman Noyes August 2, 2019

The Financial Accounting Standards Board (FASB) voted on Wednesday to propose an extension of the deadline for the implementation of the Current Expected Credit Losses (CECL) methodology for the majority of financial institutions.  Under the proposal, the effective date for public business entities that are not SEC filers would be pushed back from January 1, 2021 to January 1, 2023, and the effective date for non-public business entities that are not SEC filers would be pushed back from January 1, 2022 to January 1, 2023.

The proposal would also delay the effective date for SEC filers that qualify as a smaller reporting company until January 1, 2023.  Under the Securities and Exchange Commission’s recently-amended definition, a “smaller reporting company” is defined as a company that (1) has a public float of less than $250 million, or (2) has less than $100 million in revenues and no public float, or a public float of less than $700 million.  SEC filers that do not qualify as a smaller reporting company would see no relief under the proposed changes and will need to be prepared to implement the new standard on January 1, 2020.

These proposed changes will be subject to a 30-day comment period which will commence when the proposal is officially released.

The FASB also issued on Wednesday a question-and-answer (Q&A) document that addresses stakeholders’ frequently asked questions related to CECL.  Specifically, the Q&A addresses questions pertaining to the use of historical loss information, making reasonable and supportable forecasts, and the reversion to historical loss information.

The Q&A can be found here.

For more information, contact the BNN banking team at 800.244.7444.