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CECL - What Credit Unions Need to Know

#CECL is almost here.

NCUA recently released its simplified CECL tool. Are you eligible to use it?

NCUA developed the Simplified CECL Tool to assist small credit unions with complying with CECL. The optional tool is designed PRIMARILY for credit unions with less than $100 million in assets.

The key word is PRIMARILY. NCUA states "... it could be used by larger credit unions based on the discretion of their management and auditors."

Bottom line the tool may or may not be for you. If you utilize a #CPA for your audit and they are comfortable with this method might work best for you. Note that NCUA is very reticent to rule against your CPA. So don't get too focused on the $100 million dollar reference - if it fits your credit union - use it.

CECL becomes effective for federally insured #creditunions for financial reporting years beginning after December 15, 2022. Required regulatory reporting will begin with the March 31, 2023 Call Report.

More on CECL:

Link to all of NCUA's CECL Resources:


NAFCU requests additional clarity on simplified CECL tool from NCUA

NAFCU wrote to NCUA "urging the agency to provide additional clarity and guidance regarding the simplified current expected credit losses (CECL) tool. The NCUA created the NAFCU-supported tool to help small credit unions comply with the Financial Accounting Standards Board’s accounting standard on CECL, which goes into effect for most credit unions at the start of 2023."

NAFCU made the following recommendations:

  • while the tool may be ideal for use by credit unions under $100 million in assets, the NCUA should issue guidance indicating that it can be used by credit unions up to $1 billion in assets; MY TAKE: NCUA said credit unions can use it based on management and their CPAs. NCUA will not step between FASB and CPAs on this - so if you want to use it seek guidance from your CPA - NOT NCUA

  • the NCUA should issue guidance about what factors and modifications credit unions between $100 million and $1 billion should consider in utilizing the tool; MY TAKE: See answer above NCUA cannot and will not step into the shoes of your CPA and FASB guidance. This is up to your management team and CPAs. NCUA is wisely hinting that they will accept its use if you and your CPA deem it appropriate. NCUA is very cautious and RARELY ever challenges your CPA.

  • the NCUA should avoid requiring credit unions to hire third parties to validate their CECL model; MY TAKE: I disagree with this as this is a FASB and CPA issue.

  • the NCUA should issue guidance ensuring that credit unions have the same level of flexibility when validating the credit union’s allowance for credit losses methodology, as they did when validating their Allowance for Loan and Lease Losses methodology. MY TAKE: They have already done this....

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