A final rule permitting federally insured credit unions (FICUs) to phase in over three years the day-one adverse effects on net worth of the current-expected-credit-loss (CECL) accounting methodology is set to take effect Aug. 2, according to a notice in Thursday’s Federal Register.
The final rule, approved June 24 by the National Credit Union Administration (NCUA) Board, applies to FICUs that adopt CECL for fiscal years beginning on or after Dec. 15, 2022.
The rule was adopted largely as proposed last summer, except as follows:
- It no longer refers to specific calendar dates in the discussion of the transition period for the phase-in and now only refers to fiscal years; and
- It clarifies that state-chartered FICUs with less than $10 million in assets and that are required by state law to comply with generally accepted accounting principles (GAAP) are eligible for the transition phase-in.
Under the final rule, FICUs with less than $10 million in assets are no longer required to determine their charges for loan losses in accordance with generally accepted accounting principles (GAAP). Instead, they may use any reasonable reserve methodology (incurred loss), provided that it adequately covers known and probable loan losses, the agency wrote.
The transition rule is similar to those adopted earlier by banking regulators.