Fed Staff Want Scalability for New Impairment Accounting

By Michael Gullette

During a conference call today with more than 4,000 participants, Federal Reserve Board staff indicated that the Financial Accounting Standards Board’s new model for impairment accounting — current expected credit loss, which is expected to be finalized in January and effective no earlier than 2018 — is not a tweak to existing accounting, but rather a fundamental change to bank accounting. They said, however, that they are working closely with FASB to ensure that the accounting standard is scalable and that bankers can prepare their own estimates without hiring experts in quantitative modeling or from accounting or consulting firms.

The staff discussed the overall model and provided an example of one portion of the model: estimating unadjusted historical lifetime loss experience. Furthermore, they are encouraging bankers to begin their educational and data-gathering processes and to discuss the model internally, with peers and with external auditors. Additional conference calls will be held to discuss other aspects of CECL.