Responding to a concern initially raised by the American Bankers Association in a discussion paper, the Financial Accounting Standards board agreed today to propose changing the effective date of the Current Expected Credit Loss accounting standard for “non-public business entities” to fiscal years beginning after Dec. 15, 2021. This would mean that non-PBE banks would adopt CECL and adjust their opening retained earnings balance as of Jan. 1, 2022.
As currently written, while non-PBE banks would not adopt CECL in their Call Reports until Dec. 31, 2021, the requirement to prepare an “opening balance,” means that banks would have to effectively run both CECL and their current accounting systems throughout all of 2021. FASB’s standard practice to provide private entities an extra year of implementation time was unintentionally neglected. The correction will be proposed in an exposure draft, which is expected to be issued in the coming weeks with a 30-day comment period.
