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In a letter to the Financial Accounting Standards Board (FASB), NAFCU President and CEO Dan Berger offered the association's support for delaying the implementation deadline of the current expected credit loss (CECL) standard and other major standards, as doing so "will help mitigate the challenges credit unions face as they prepare to adopt" the standards.

"Specifically, a one year delay of CECL's effective date will provide much needed relief by granting credit unions additional time to train staff, develop models for different loan pools, and conduct parallel runs," Berger said. "For many smaller credit unions, this additional time is critical to ensure a smooth transition and prepare for the disruption that increased allowances may have on capital."

Berger sent the letter as FASB met with its Not-for-Profit Advisory Committee to discuss the proposed Accounting Standards Update (ASU) to delay the CECL standard by an additional year. The proposal would also extend the effective dates for the hedging and leases standards, and also extend and simplify how effective dates for future major standards are staggered between larger public companies and all other entities – including credit unions.

In addition to offering support for the proposed ASU, Berger flagged the negative impact CECL will likely have on credit union capital and urged FASB to work with the NCUA to find a solution.

"Credit unions are subject to a statutorily defined capital framework that places limits on the NCUA's ability to mitigate CECL's impact on net worth without accompanying action from the FASB. This is because net worth is defined as a credit union's 'retained earnings balance, as determined under generally accepted accounting principles,'" Berger explained.

NAFCU maintains that credit unions should never have been subject to CECL and asks that the FASB consider less burdensome alternatives which recognize credit unions’ cooperative, not-for-profit structure and role within their communities

Last month, FASB issued a proposed CECL delay after stakeholders and several other parties expressed concerns over its implementation.

NAFCU has shared its concerns about the CECL standard – from its implementation burdens to its impact on credit unions' capital – since FASB issued the standard in 2016. The association's advocacy efforts have achieved relief for the industry, and it will continue to fight for more.