Recently, The Financial Accounting Standards Board (FASB), issued a new accounting standard, which introduced the current expected credit losses methodology (CECL) for estimating allowances for credit losses. The new accounting standard was introduced in (ASU) 2016-13, and it allows a financial institution to leverage its current internal credit risk systems as a framework for estimating expected credit losses.

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC), (hereafter, the agencies), have published an initial set of frequently asked questions (FAQ), to assist institutions and examiners.

According to the agencies, the new accounting standard applies to all banks, savings associations, credit unions, and financial institution holding companies, regardless of size, that file regulatory reports for which the reporting requirements conform to U.S. generally accepted accounting principles (GAAP).

The agencies said they plan to publish additional FAQs and/or update existing FAQs periodically.

How MBAF Can Help

If, after reviewing the FAQs provided by the agencies, you still have questions regarding the new CECL standard, please feel free to contact our financial institutions specialists. We would be happy to help you apply the new standards in the most effective way for your particular institution. 

Taxation and regulatory issues regarding the new CECL standards can be complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Advisory, do not hesitate to contact our Financial Institutions specialists, or call us at 1-800-239-1474.

 Download the FAQs on the New Accounting Standard on Financial Instruments – Credit Losses from the FDIC.