Even before it has issued the final standard on credit impairment, the Financial Accounting Standards Board is reconsidering the planned effective date and is promising clarifications that have been demanded by a vocal contingent of smaller financial institutions.

FASB’s newly organized Transition Resource Group on credit losses met for the first time to consider a handful of concerns that have been raised by community bankers and credit unions as they have followed FASB deliberations on its intended “current expected credit loss” model for recognizing signs of trouble in troubled debt instruments. While the financial services sector has not objected to the notion that a new accounting model should produce earlier notice to investors that a given loan is not performing, smaller institutions have fretted over whether the requirements would lead to difficult and costly accounting processes and procedures.

In earlier open discussions with representatives of the Independent Community Bankers of America and the American Bankers Association, FASB heard grave worries that the planned language of the new standard would produce prescriptive requirements for the use of complex accounting models that would be costly and even irrelevant to smaller institutions. James Kendrick, vice president of accounting and capital policy for the ICBA said the new standard would put community banks out of business.

The TRG agenda focused on questions smaller institutions have raised around the methodologies that would be required under the new standard. FASB Chairman Russ Golden said in a statement following the first meeting of the group that the board will consider “new clarifications” to the standard to answer some of those concerns and will deliberate “potential modifications to the effective dates.”

FASB’s planned effective date for the new credit impairment standard is 2019 for public companies. The board is targeting the end of the second quarter this year to finalize the standard, a date that has already been pushed out from earlier projections. That’s in addition to a 2018 effective date for classifying and measuring financial instruments, a standard that is already final, and a 2018 effective date, already delayed from 2017, for new methods of recognizing revenue. A major new standard on leasing also takes effect in 2018.

The National Association of Federal Credit Unions was quick to praise FASB for its reconsiderations. “NAFCU and our members agree that redeliberating the implementation date is warranted considering the substantial amount of time that has passed since the implementation date was voted on by FASB,” said President and CEO Dan Berger in a statement. While supportive of an extended implementation date, the group would prefer to see FASB issue the planned CECL model guidance as a new exposure draft for a new round of public review and comment, he said.

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