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FASB votes to delay CECL adoption for small companies to 2023

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FASB votes to delay CECL adoption for small companies to 2023

The Financial Accounting Standards Board voted unanimously to delay the adoption of the current expected credit losses standard for small companies.

FASB in August proposed delaying the adoption by two years to January 2023 for private companies, not-for-profit companies and certain small public companies. Smaller reporting companies, as defined by the Securities and Exchange Commission, are also covered under the CECL delay. These companies have a public float of less than $250 million or annual revenues of less than $100 million and either no public float or a public float of less than $700 million.

Companies not covered under the delay still need to comply with the accounting standard, which requires loan-loss reserves to be made at the point of origination instead of when a loss becomes likely, by Jan. 1, 2020.

At its Oct. 16 meeting, the FASB said final guidance on CECL would be released in mid-November.

The American Bankers Association in September wrote a letter to the FASB arguing for "a full and indefinite delay" of the accounting standard for all companies. The bankers' trade group argued CECL would worsen economic downturns by unintentionally increasing procyclicality because it would lower the supply of credit in the economy, which would harm subprime borrowers and consumers who rely on longer-term loans.

The National Association of Federally-Insured Credit Unions also supported the delay and called on the accounting board to help credit unions prepare to adopt the standard.