FASB Reviews CECL Implementation

With the CECL accounting standard now in effect for large, public companies, the Financial Accounting Standards Board met on Dec. 2 to discuss the feedback it has received to date on the standard as part of its post-implementation review (PIR). As a reminder, FASB has touted the PIR as the mechanism through which it will address any issues that arise from CECL or other new major accounting standards. The process will be ongoing for two to three years after the standard’s effective date, so in the case of CECL, it should continue through 2024 or 2025. The process is fueled by outreach to various stakeholders and based on their feedback, the board may choose to undertake new projects.

What follows is a quick recap of the feedback discussed at the Dec. 2 meeting.

Non-PCD loans in an acquisition

FASB has received consistent feedback from investors that they were unable to compare how companies determined which loans are classified as “purchased with credit deterioration” (or PCD, which exempts the loans from the “day 1 loss” provision expense at acquisition) versus non-PCD based on disclosures that have been provided. In line with what ABA and the industry have communicated since the model was first proposed, FASB noted dislike from financial statement preparers for the non-PCD accounting model —specifically, that the “double-count” for non-PCD loans (reflecting both a fair value-based credit discount and a CECL allowance) is not consistent with the rest of the accounting standard, is inconsistent with the economics of the acquisition and may hurt bank valuations for M&A.

Overall, FASB members expressed a desire for the staff to develop a project to address this. ABA’s concern is that they will try to address the issue solely from the disclosure standpoint and not to actually fix the accounting, as this double-count normally increases goodwill, which is excluded from regulatory capital.


Investors also complained of a lack of comparability in disclosures and noted that they are unable to determine how banks are building their estimates based on the qualitative nature of the disclosures. Lack of comparability is fundamental to CECL and has been an issue in almost every comment letter the ABA has filed on the standard.

That being said, this is by far ABA’s biggest area of concern based on FASB’s discussion. Several board members are interested in creating significant quantitative disclosures to make CECL comparable for investors, though one would not support such a project until the SEC review process has had a chance to drive more consistent and comparable disclosure. Regardless, this is an area to keep close tabs on.

Troubled debt restructurings

FASB received feedback from ABA and others that the TDR model is obsolete, costly and provides little value to investors. FASB members discussed the potential for changing the accounting model on TDRs, including doing away with the TDR test and having a separate “disclosure-only” regime. No specifics emerged on how that would look, but board members either supported the position or expressed opposition not on substance, but based on it not being a priority issue as it relates to CECL.

Future Plans

FASB members mentioned potentially holding a roundtable event in spring—ABA will provide additional information to members when it becomes available. FASB Chairman Rich Jones also encouraged any companies, investors or others to reach out to them with any feedback.

ABA is in regular contact with FASB members and staff to provide feedback, but bankers are also strongly encouraged to give their own individual, direct feedback. Providing that feedback is easier than you think, so please reach out to me if you have interest in doing so.

Speaking of providing feedback and what’s next for CECL, ABA has refashioned its CECL efforts through a new CECL working group. The group’s purpose is to advise ABA staff on advocacy direction and efforts regarding CECL. The current focus is on regulatory capital relief, legislative technical correction and extension of CARES Act Section 4014, and seeking operational relief for smaller institutions via a “CECL-lite” option.

If you have any questions, are interested the CECL Working Group, or want to know more about “CECL lite,” contact me for more information.


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