Banks Express Concerns over FASB Credit Loss Standard
Banking institutions of all sizes are preparing to implement the Financial Accounting Standards Board’s (“FASB”) new standard that requires the calculation of future losses on bad loans versus disclosing losses that have already occurred. While the largest accounting update in years for banks requires an additional workload, some lenders are uncertain about how to sift through their data for estimating future losses and setting aside cash reserves. At the American Institute of Certified Public Accountants’ National Conference on Banks & Savings Institutions last week, Federal Savings Bank executive vice president and CFO James Brannen touched on the difficulties a small. Read More.
Topics: Accounting Standards Update "ASU", AICPA National Conference on Banks & Savings Institutions, Banks, FASB credit loss standard, Financial Instruments - Credit Losses (Topic 326), Securities and Exchange Commission "SEC"
SEC Asked to Use Principles-Based Approach for Disclosure Updates
In response to the Securities and Exchange Commission’s (“SEC”) efforts to amend the disclosure requirements for bank holding companies, one Big Four accounting firm has asked the agency to develop a principles-based framework. One Big Four firm remarked that disclosures under a principle-based approach would better align with how registrants oversee their business. The firm said such disclosures may help financial information users since the requirements allow a registrant to exercise judgment in reviewing how to meet compliance. In addition, the Big Four firm noted that while strict and consistent requirements could help investors compare banks, they typically do not. Read More.
FASB to Create Advisory Panel for Adoption of Asset Impairment Standard
Expected to issue its standard for recording loan losses next year, the Financial Accounting Standards Board (“FASB”) is creating an advisory panel to assist companies in the implementation of Proposed Accounting Standards Update No. 2012-260, Financial Instruments—Credit Losses (Subtopic 825-15). Responding to investors’ complaints about banks using the incurred-loss model for reporting losses during the global financial crisis, the standard will help disclose bad loans and securities, as well as adopt a current-expected-credit-loss (CECL) model. The new model will require banks to evaluate forthcoming losses on loans going bad and establish reserves based on such estimates. Commenting on the advisory. Read More.