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Thursday, April 28, 2016

FASB Moves Forward with CECL, Delays Implementation

The Financial Accounting Standards Board voted to move forward with its Current Expected Credit Loss standard, but agreed to push the implementation timeline back by one year after a request by ABA. Banks that file with the SEC will now have until 2020 to implement CECL, while non-SEC filers will have until 2021. Early adoption will be permitted starting in 2019.

Prior to the vote, FASB board members discussed the challenges banks will face during implementation. Although a FASB member believed that Excel spreadsheets could be used by community banks to cut costs, the board also acknowledged many difficulties banks will have in implementing CECL – such as estimating the effects of prepayments and credit migration in the context of future forecasts. Ultimately, however, the board members concluded the benefits of earlier loss recognition outweigh the costs.

FASB will now move forward with a “ballot draft” of the final standard that must be approved by the board prior to release, which is still expected to be in June. Upon the issuance of the final standard, ABA will host webinars and organize peer groups to assist bankers in working through the implementation process.

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