Accounting Standards Finalized

Greetings from Saratoga Springs where we are, of course, holding an annual convention.  Incidentally, a very reliable source told me that Saratoga is the birth place of the American Bankers Association.

To the dread of credit unions everywhere, the FASB finalized its Current Expected Credit Loss Standards (CECL).  Why are credit unions so concerned about this?  Because the accounting standards, when fully implemented in 2020, will require financial institutions including credit unions to anticipate potential losses on loans and account for them earlier in the loan cycle.  This means, that if the standard works as anticipated, financial institutions will have to put more money aside to account for losses.  A second concern credit unions have is that complying with the new standard will require them to adopt and invest in sophisticated analytical tools to better project anticipated losses.

The FASB has been adamant that many small institutions will be able to comply with the new standard using their existing practices.   In a document accompanying the release of the final standards yesterday, the Board explained that “most organizations should be able to leverage existing systems and processes to comply with the new standard, and organizations will not need to forecast economic conditions over the entire contractual life of long-dated financial assets.”

I would save this quote for your examiner simply because, while I believe that many fears about this new standard have been exaggerated, I agree with those who argue that the key to the successful adoption of this new standard will hinge on examiner education.  Of course, this is one that you should sit down and discuss with your accountant.

Legislature Goes Into Overtime

The New York State Legislature is still not quite done completing its work so is still in session today.  I will provide a recap of the legislative session in Monday’s blog.  Try to contain your excitement.