NCUA has proposed a rule to address changes to the U.S. generally accepted accounting principles (GAAP). The proposed rule would provide that for a credit union’s net worth classification under the prompt corrective action, NCUA will phase in the day-one adverse effects on regulatory capital that may result from the adoption of the current expected losses, or the CECL methodology.
Also, the proposed rule would temporarily mitigate the consequences of the day-one capital adjustments, while requiring that credit unions account for CECL for other purposes, such as Call Reports. The rule would also provide that credit unions with less than $10 million in assets are no longer required to determine their charges for loan losses in accordance with GAAP but may instead use any reasonable reserve methodology.
You can find the proposed rule here. For those of you who don’t follow accounting issues, please solicit feedback from those at your credit union who are familiar with CECL, such as your CFO, auditors or other accounting professionals. Comments are due by Oct 19, so please submit your comments to Michael.Lee@lscu.coop no later than Oct. 12.
Please visit our site to see other comment letters LSCU has submitted on behalf of our credit unions.