Financial Accounting Standards Board Chairman Russ Golden said during a routine weekly board meeting that FASB will schedule a roundtable in January to discuss issues that have surfaced during implementation of Accounting Standards Codification Topic 326, which requires companies to develop a current expected credit losses (CECL) model for reporting signs of stress in loan portfolios. Financial institutions have called on FASB to delay the effective date and further study the economic consequences of the new standard.
Even Congress is making noise over CECL, with a year-end sub-committee hearing in the House Financial Services Committee and more recently a letter from 28 members of Congress urging the U.S. Treasury to intervene. Addressed to Treasury Secretary Steve Mnuchin, the House Republicans “urge you, as chairman, to closely evaluate the negative consequences this standard will place on the banking industry, small businesses, and the consumer.” The members of Congress also call on Mnuchin to delay the effective date of the standard, which is set for Jan. 1, 2020, “until the comprehensive analysis on this standard has been completed.”
Treasury's Financial Stability Oversight Council discussed CECL during an executive session, according to a statement. The discussion addressed "the independence of the FASB, the implications of this change in financial reporting, and member agencies’ plans for alignment of capital rules under their regulatory regimes, as applicable," the statement says.
FASB has acknowledged the calls for further study and reconsideration of the CECL model, which was developed over many years working with financial institutions and investors but has not wavered so far on the effective date or the core tenets of the standard, leaving bank regulators to work out concerns about the standard's effect on regulatory capital. Those regulators recently approved a measure that would permit banks three years to ease into the regulatory capital effects of the new accounting.
The January roundtable will cover how FASB staff has researched and responded to agenda requests, including a recent proposal to reconsider the income statement effect of the CECL model. “The FASB’s consideration of charge-offs and recoveries as a component of the vintage disclosures and other transition issues will also be discussed,” the board said.
FASB has been fielding and answering implementation issues on the CECL standard through its Transition Resource Group since issuing the standard in 2016. “FASB members and staff have been working with stakeholders to facilitate a smooth transition by addressing questions and obtaining feedback on the guidance,” said Golden in a statement. “The roundtable will provide stakeholders yet another opportunity to discuss cost-effective issues they believe the board should address.”