CARES Act Delays Implementation of FASB CECL Standard

By:
Chris Gaetano
Published Date:
Mar 30, 2020
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The $2 trillion CARES Act, meant to blunt the economic impact of the COVID-19 pandemic, includes a provision excusing all financial institutions from having to comply with the Financial Accounting Standards Board's standard on current expected credit loss (CECL). The standard has been effective for public entities since the beginning of this year, with other entities instructed to apply it in 2023 (the original 2021 effective date was moved in November via FASB vote).

The standard, among other things, requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, with the objective of presenting an entity’s estimate of the net amount expected to be collected on the financial assets. Under this guidance, entities will use reasonable and supportable forecasts to better inform their credit loss estimates. The standard does not require a specific credit loss method, however; it allows entities to use judgment in determining the relevant information and estimation methods that are appropriate in their circumstances.

The bill specifically says that "[n]o insured depository institution, bank holding company, or any affiliate thereof shall be required to comply" with the standard, "including the current expected credit loss methodology for estimating allowances for credit losses" until either Dec. 31, 2020, or when the president declares the national crisis to be over.

Even before the bill was enacted, there had been a great deal of pressure to delay the standard. Members of Congress, in fact, had advanced legislation doing exactly that last fall, responding to concerns from banks, credit unions and finance companies. Later, once the pandemic was in full swing, the FDIC joined in the call to delay implementation, although the FASB expressed hesitance at this idea, saying that this was not the proper way to combat the financial impacts of the coronavirus.

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