In a significant move, the Financial Accounting Standards Board (FASB) yesterday voted to propose a delay for the implementation of the current expected credit loss standard until January 2023 for certain companies. The delay would apply to small reporting companies (as defined by the SEC), non-SEC public companies and private companies.
'FASB’s vote to delay CECL for certain smaller banks offers further proof that the required efforts to implement this costly standard are far greater than the board has previously led bankers to believe,” said ABA President and CEO Rob Nichols after the vote. He noted with concern, however, that the delay would not apply to all banks; for larger public companies, the standard would still take effect in January 2020.
Nichols called on FASB to apply the delay to banks of all sizes and use the additional time to “conduct a rigorous quantitative impact study to properly assess the effect this new standard will have on their ability to serve their customers and the broader economy, particularly during an economic downturn.” He added that “a partial delay without a requirement for study or reconsideration simply kicks the can down the road—it does not reduce the ongoing data, modeling and auditing requirements facing smaller banks or address the increased procyclicality it will cause.”
He also reiterated ABA’s call for congressional leaders to act to delay CECL’s implementation. Bills have been introduced in both the House and Senate to “stop and study” the standard and its effect on the economy.