Updates finalize CECL effective date delays, including for privately held banks, most credit unions (to 2023)

Various effective date delays for accounting standards on current expected credit losses (CECL) were finalized Friday by the accounting industry’s standards-setting group, one of which pushes the date to January 2023 for smaller financial companies, including privately held banks, credit unions, and others.

The Financial Accounting Standards Board (FASB) said it issued two Accounting Standards Updates (ASUs): ASU 2019-10, “ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):Effective Dates,” and “ASU 2019-09, Financial Services—Insurance (Topic 944): Effective Date.”

ASU 2019-10 finalizes various effective date delays for private companies, not-for-profit organizations, and certain smaller companies (in particular, the privately held banks and most credit unions) applying CECL. The other, ASU 2019-09, finalizes insurance standard effective date delays for all insurance companies that issue long-duration contracts, such as life insurance and annuities.

The date under 2019-10 represents a one-year extension by FASB for the banks and credit unions, from January 2022 to January 2023.

The board had previously extended the compliance date to 2022 just last fall (a one-year extension from the previous date). The proposal was subject to a 30-day public comment period by the FASB, following the board’s procedure.

Prior to the extension, an outcry over the accounting standard had been voiced from a number of organizations and financial institutions about complying with the standard – which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

Regulators have followed closely the development of the rule since its adoption in 2016, and various compliance date extensions since then. In April, the federal banking agencies and the National Credit Union Administration (NCUA) jointly published a list of “frequently asked questions” about the accounting standard – the third such set of FAQs published since the rule’s adoption nearly three years ago.

FASB delays certain effective dates for credit losses, leases, hedging, and long-duration insurance standards

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