The American Bankers Association on Friday called on the Financial Accounting Standards Board to extend a “full and indefinite delay” of the current expected credit loss standard to all companies, regardless of size. “Such a delay will help FASB and its constituents place themselves on the same page related to a sound implementation of an accounting standard that, due to its impact on financial intermediaries, will have significant impact to all companies across the country,” the association said in a comment letter.
FASB last month issued a proposal that would delay CECL’s implementation for small reporting companies (as defined by the SEC), non-SEC public companies, and private companies; however, under the proposal, large public companies would still be required to comply by January 2020. ABA reiterated its concerns about the inherently procyclical nature of CECL and its potential to negatively affect credit availability in an economic downturn. The association also raised new concerns that the auditing industry is not ready for a 2020 CECL effective date.
A full delay of the standard would allow regulators to conduct a “necessary and appropriate” quantitative impact study that would take into account CECL’s effects on bank lending and bank competition, something ABA has long called for. It would also allow for re-evaluation of investor support for the standard, and for auditing guidance to be integrated into CECL, the association said.
“CECL’s impact on financial intermediaries will undoubtedly be significant, with its impact being felt ultimately on the end consumers and commercial enterprises,” ABA said. “A thoughtful and deliberate discussion, therefore, needs to take place that includes a quantitative impact study across the industry and across the business cycle.”
ABA sent a separate comment letter to the American Institute of Certified Public Accountants highlighting the lack of preparedness in the audit industry ahead of CECL’s effective date. The association urged AICPA to request a delay of CECL until standards and guidance can be finalized.
“In the three years since CECL was issued, ABA has observed contradictory statements from FASB members, regulators and auditors in regards to various key aspects of a CECL audit,” ABA said. “With that in mind, no audit should be performed until there is a generally accepted understanding of the key issues and how such issues should be addressed.”
ABA noted that the final CECL standard should address audits of smaller institutions, and highlighted several areas where further guidance or greater clarification is needed.