FASB Issues Limited CECL Transition Guidance

Responding to requests from certain specialty lenders, FASB today said it would allow companies to avoid CECL by electing a “fair value option” for certain assets. The fair value option is normally allowed only at the time of acquisition and, thus, is generally unavailable for assets held prior to the effective date, which is January 1, 2020, for SEC registrants. Under the amendment, companies may now elect the fair value option for those loans.

FASB’s action is likely to have little impact on banks, as most lenders interested in the fair value option originate subprime loans with high loss expectations and are typically outside of the regulated banking industry.