FASB met in the first week of April to discuss issues related to the current expected credit loss (CECL) standard and took two key decisions. The Board decided that the proposed alternative submitted by a group of regional banks on November 05, 2018, and their follow-up letter, which was submitted on January 11, 2019, would not result in incremental improvements to the accounting for expected credit losses. The Board also decided that an entity is not required to disclose gross write-offs and gross recoveries by vintage.
On November 05, 2018, a group of 20 U.S.-based regional banks and an industry trade group had submitted a proposal to FASB. The proposal recommended an alternative approach to presenting the provision for expected credit losses in the financial statements. The proposal sought to bifurcate expected credit losses for performing loans by presenting the first 12 months of expected credit losses in the net income as a provision expense while presenting credit losses expected to occur beyond the first 12 months in other comprehensive income. For impaired loans, an entity would record the full amount of expected credit losses in the income statement as a provision expense. However, the Board rejected this request 21 regional banks to consider changing the way the impact of CECL would be recorded in financial statements.
In addition to deciding that an entity is not required to disclose gross write-offs and gross recoveries by vintage, the Board directed the staff to conduct additional outreach and research on the costs and benefits of disclosing gross write-offs and gross recoveries in the vintage disclosure table. Other topics of discussion included consequential and technical corrections for convertible instruments and for the derivatives scope exception under the Topic 815 on Derivatives and Hedging.
Keywords: Americas, US, Accounting, Banking, CECL, Credit Risk, IFRS 9, Disclosures, Topic 815, Derivatives and Hedging, FASB
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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