A Federal Accounting Standards Board proposal could requirecredit unions to put more money aside into loan lossallowances.
|Issued Dec. 20, the proposed model would require an “expectedcredit loss” measurement, replacing the current model that requiresa loss to be actually incurred before recognized.
|Credit union accounting consultant Mike Sacher told Credit Union Times the proposal is “ahot topic” in his business, and said if the standard becomes final,it would have a significant impact on credit union financials.
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He will lead a webinar Wednesday on the proposal in partnership with Callahanand Associates.
|He said in a Callahan opinion piece posted on the firm's website that creditunions would have to evaluate not only past and current events, butalso make “reasonable and supportable” forecasts to gauge futurecollectability when measuring ALL. The increased ALL balances willput a strain on net worth, he added.
|FASB Chairman Leslie F. Seidman said in a release the proposalintends to provide “more timely recognition of expected creditlosses and more transparent information about the reasons for anychanges in those estimates.”
|The accounting board is accepting comments on the proposalthrough April 30.
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