In a recent letter to the Financial Accounting Standards Board, New York Credit Union Association President/CEO William J. Mellin said the Association is supportive of the board’s plan to delay the effective date of the current expected credit loss accounting standard, commonly known as CECL. The proposal seeks to delay the effective date of the standard until January 2023 for credit unions.
Mellin explained in the letter that the delay will help both credit unions and regulators prepare for these important new changes.
“As you are no doubt aware, many credit unions are small financial institutions with limited staff that are already required to comply with a wide range of new regulations,” Mellin wrote. “The Association appreciates any efforts on the part of FASB to make the transition to these new accounting standards easier for our institutions.”
Mellin noted that since the FASB started to consider making changes to the accounting standards for expected losses, credit unions have argued that it makes little sense to impose the same accounting standards on both the largest and smallest institutions in the world.
“A $10 million credit union does not represent the type of risk, nor should it be expected to have the same accounting framework, as JPMorgan Chase,” Mellin wrote. “This proposal recognizes this common-sense distinction. By staggering the effective date of the new accounting standards, depending on whether or not an entity is a public business as defined by the SEC, small, less sophisticated institutions will get the additional time to assess how best to comply with CECL and anticipate its potential financial impact.”
Mellin concluded that while the Association welcomes the proposed extension, credit unions remained concerned by the burdens imposed by CECL. He urged the FASB to consider carving out institutions below a certain asset size. If the FASB is unwilling to take this step, Mellin said they must use the additional time to provide greater guidance to both the financial institutions and their primary regulators as to how the accounting standards should be implemented and interpreted.
As previously reported, the FASB voted in July to delay the implementation of their CECL standards until 2023 for credit unions and most other lenders. The nation’s largest banks—those registered with the Securities and Exchange Commission—must still comply with the standard in January 2020.