The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...
Banks will have flexibility in how they calculate loan and other credit losses under new accounting rules spurred by the financial crisis of 2008-2009, Harold Schroeder, a member of the Financial Accounting Standards Board, told Bloomberg BNA.
“It really leaves open what banks can do,” Schroeder, a former banking analyst, said in a video interview July 17 on the FASB standard—ASU 2016-13; ASC 326.
Watch Schroeder’s interview here: https://www.bna.com/fasbs-accounting-credit-m73014463443/
The 2016 FASB standard on accounting for credit losses could have substantial impacts on bank earnings. The rules require earlier, up-front booking of expected credit losses.
“We’re not dictating and we’re not setting the specific requirements in terms of how they calculate” expected credit losses and reserves set up to absorb those potential setbacks, he said of banks.
Loss models can be “scalable” and not overly complex, hinging on the size of a bank or credit union, rulemakers and bank regulators have said.
Bigger banks will have to apply the new rules Jan. 1, 2020. Early adoption is allowed for reporting on periods starting after Dec. 15, 2018.
Schroeder set out the principle under-girding the new accounting rules, which herald the biggest change in banks’ accounting in decades: “What do you have on the books today? What do you think you’re going to collect relative to what you have booked? And then record as a reserve the difference.”
He said that amounts to “an A minus B equals C type of equation.”
“Most banks already know what they have recorded,” Schroeder said. “The real question is what do they expect to collect.”
To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)