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 after December 15, 2021. As a result, smaller institutions like community banks and credit unions will apply the standard in 2022.
The board claimed that a 2022 effective date for smaller institutions was the original intent, but banks and professional groups claimed the wording used in ASU No. 2016-13 for the cumulative-effect adjustment made the effective date appear that community banks and credit unions would adopt the standard effective January 1, 2021.
According to a FASB spokesperson, the final version of the amendment will likely be published by year’s end.