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Amended Capital Rule for FASB Credit Loss Standard Proposed

The Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation have proposed amending regulatory capital rules to improve consistency among bank regulation and the Financial Accounting Standards Board’s credit loss standard. Issued as Regulatory Capital Rules: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rules and Conforming Amendments to Other Regulations, the proposal would give banks the choice to phase-in the capital impacts of implementing Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial. Read More.

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Smaller Banks Can Avoid Using Complex Models in Calculating Loss Reserves

Community bankers could be exempt from using the complex models necessary to comply with the Financial Accounting Standards Board’s (“FASB”) credit loss standard. Banking regulators said that the current expected credit loss model under Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, is flexible enough that smaller lending institutions are not required to purchase expensive software or use complex modeling techniques to meet the standard’s provisions for calculating loss reserves. During a February 27 webcast, the Federal Reserve’s Joanne Wakim stated that small banks could calculate loss reserves. Read More.

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SEC Official Asks Public Companies to Focus on Key FASB Standards

Securities and Exchange Commission (“SEC”) official Michael Dusza is advising public companies to consider how the adoption of several standards from the Financial Accounting Standards Board (“FASB”) could impact their financial reporting controls. During a speech last month in Washington D.C., Dusza stressed that the accounting changes for revenue recognition, leases, and credit losses are likely to create significant challenges when public companies test internal controls during the adoption phase. Accounting Standards Update (“ASU”) No. 2014-09, Revenue From Contracts With Customers (Topic 606), is effective January 1, 2018 for public business entities. ASU No. 2016-02, Leases (Topic 842), will be. Read More.

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FASB to Clarify Troubled Debt Restructurings Guidance

Guidance for troubled debt restructurings under the Financial Accounting Standards Board’s (“FASB”) credit losses standard will soon receive an update. The FASB intends to clarify the recognition and measurement of troubled debt restructurings by allowing banking institutions that calculate allowances for credit losses on modified loans to select a prepayment-adjusted effective interest rate when implementing Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The clarified guidance would allow banks that calculate allowances for their credit losses on troubled debt restructurings to select a prepayment-adjusted effective interest rate when. Read More.

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FASB Agrees on Guidance for Troubled Debt Restructurings

The Financial Accounting Standards Board (“FASB”) plans to clarify its guidance for troubled debt restructurings under Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During its September 6 meeting, the FASB agreed that lenders should assess the impact of the restructuring when the individual troubled loan is known. In certain situations, banks are free to make estimates based on historic data, which the FASB refers to as a “portfolio-level” approach. FASB member Christine Botosan remarked that the decision allows banks to estimate troubled debt restructurings earlier, wherein the estimation. Read More.

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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. Read More.

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