FASB Proposes Narrow Scope Improvements to Credit Losses

Stakeholders are encouraged to review and provide input on the proposed Accounting Standards Update (ASU) issued by FASB on Measurement of Credit Losses on Financial Instruments by July 29, 2019.

A negative allowance describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset—but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether negative allowances were permitted on assets that had already shown credit deterioration at the time of purchase (also known as PCD assets).

In response to this question, the proposed ASU would permit organizations to record negative allowances on PCD assets.

In addition to other narrow technical improvements, the proposed ASU would also reinforce existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities.

The proposed ASU is available at www.fasb.org

FREE CECL Roundtable on July 19th
Want to learn how to prepare? Join us, Friday, July 19, 2019, from 11:00 am – 2:00 pm, at the New Jersey Credit Union League’s Education Center, for a Visible Equity CECL Roundtable to learn best practices for a successful CECL transition. Up to 2 CPE credits will be offered and lunch will be provided. Network with other credit union executives in your area to better learn new allowance guidelines, implementation steps, regulatory impacts, and CECL stressors, as well as learn tips and tricks to help you be CECL-ready. Register today at NO COST!