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Bank Regulators Add Guidance for FASB Credit Loss Standard

Several bank regulators have updated their interpretive guidance regarding the Financial Accounting Standards Board’s (“FASB”) credit loss standard. The revised guidance from Federal Deposit Insurance Corporation, Federal Reserve, the National Credit Union Administration, and the Office of the Comptroller of the Currency will be added to the December 2016-published frequently asked questions document that explains why the FASB issued Accounting Standards Update No. No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

The new guidance addresses how to handle subjective information when banks estimate their loss reserves when applying ASU No. 2016-13. In addition, the guidance describes the data banks will have to estimate any expected losses during the span of their loans. The guidance also outlines the implementation guidance and effective date for banks defined as public business entities by the FASB, including those bound by the Securities and Exchange Commission’s reporting rules.

Until public companies are required to apply the FASB’s credit loss standard in 2020 (private companies have until 2021), the current guidance under U.S. GAAP for writing down loans and other receivables are in effect.

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