Overnight Index Swap Rate Added to Hedge Accounting Benchmark List
In the latest Accounting Standards Update (“ASU”), the Financial Accounting Standards Board has added the Secured Overnight Financing Rate Overnight Index Swap Rate (“SOFR OIS”) to its list of hedge accounting benchmark interest rates permissible in U.S. GAAP. With ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate Overnight Index Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, the SOFR OIS join the London Interbank Offered Rate swap rate, U.S. Treasury debt interest rates, and the OIS founded on the Fed Funds Effective Rate as benchmark rates allowed for hedge accounting.
Credit Loss Standard Effective Date Delayed for Community Banks and Credit Unions
An upcoming clarification to the Financial Accounting Standards Board’s (“FASB”) credit loss standard ensures that credit unions and small banks will get an extra year to implement Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326). By a unanimous vote on October 24, the FASB confirmed several amendments under Proposed ASU No. 2018-270, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The proposed changes include merging the implementation dates for private companies’ annual financial statements and their interim financial statements. Private companies must apply the standard for fiscal years, as well as interim periods within such years, starting. Read More.
Trade Group Asks Federal Regulators to Delay Credit Loss Standard
Months after the banks and trade groups called for additional time to implement the Financial Accounting Standards Board’s (“FASB”) credit loss standard , the Bank Policy Institute wants federal regulators to postpone the most significant change to bank accounting in decades. In a letter to the Financial Stability Oversight Council (“FSOC”), the trade group warned that the financial system could be at risk due to Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Bank Policy Institute, which represents several large U.S. banks, said implementing the FASB’s current expected credit loss model could undercut financial stability in a recession or financial crisis. The group believes ASU No. 2016-13. Read More.
Small Bank Executives Say More Resources Needed to Implement Credit Loss Standard
To prepare for the Financial Accounting Standards Board’s (“FASB”) credit loss standard, Bank of America assembled a 50-employee team. Small community banks, however, lack the resources and workforce to effectively comply with Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This issue was highlighted recently during a panel discussion at the AICPA’s National Conference on Banks and Savings Institutions in Maryland. Greg Saville, executive vice president of Kansas-based First National Bank, argued that his entire bank is of equal size to Bank of America’s assembled team. Saville also noted. Read More.
FASB Tweaks Guidance for Leases
In July, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that includes targeted improvements to its leases standard. ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, introduces a transition model for entities and offers a practical expedient to lessors concerning separation of lease and non-lease components. The new standard also provides entities the option to apply the transition requirements at the guidance’s adoption date rather than the earliest comparative period disclosed in financial statements. For entities that have not adopted Topic 842, the effective date of ASU No. 2018-11 is the same as the effective date. Read More.
Regulators to Offer Flexibility on FASB Credit Loss Standard
When it comes to the Financial Accounting Standards Board’s (“FASB”) credit loss standard, Federal Reserve chief accountant Joanne Wakim said regulators want to give banks flexibility when estimating their expected losses on loans and securities. At the American Institute of Certified Public Accountants’ National Conference on Banks and Savings Institutions this week, Wakim echoed the FASB’s statements that there is no single method to help banks estimate loan losses, and financial institutions should take several factors into account. She also said banks could continue to use current methodologies with changes to inputs and assumptions. Further, Wakim said regulators will not. Read More.