Letters to Credit Unions No.: 17-CU-05
Joint Statement – Frequently Asked Questions on the New Accounting Standard on Financial Instruments – Credit Losses

September 2017

On June 16, 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard, Accounting Standards Update (ASU) 2016-13, Topic 326, Financial Instruments – Credit Losses. The new standard introduced the current expected credit losses methodology (CECL) for estimating allowances for credit losses. For credit unions, the CECL methodology will become mandatory December 31, 2021. However, credit unions will need to begin taking steps in advance of 2021 to ensure effective implementation of CECL, although NCUA states that it will not begin evaluating credit union implementation progress until after 2018.

This NCUA Letter to Credit Unions (LTCU) provides an updated Frequently Asked Questions (FAQs) about the CECL requirements and NCUA’s supervisory expectations. This updated FAQ adds 13 new questions (questions 24-37) to the previously published CECL FAQs contained in NCUA’s LTCU 16-CU-13.

To prepare for the implementation of CECL, credit unions should be familiarizing themselves with the new accounting standard to assess how CECL differs from the existing incurred loss model.  Credit unions should then begin evaluating the various allowance estimation methods to determine which would be appropriate for the credit union. NCUA notes that the implementation of CECL may impact a credit union’s net worth and credit unions should plan for the potential impact on regulatory capital. 

NASCUS will be working with state regulators to determine state expectations for CECL implementation.

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