Kroeker: Banks Need to Implement Credit Loss Standard on Schedule
Despite pleas from banks, trade groups, and some lawmakers for FASB to delay when banks must comply with the board’s sweeping new current expected credit loss rules, FASB Vice Chairman James Kroeker says that banks need to implement the standard by its effective date. “CECL is the enacted standard,” Kroeker said during a November 12 press briefing. “I would encourage people to continue to move forward, expecting to implement on the effective date.” The new model will require businesses to look to the future, assess broad economic factors, and consider past experience to make estimates on expected losses and set aside corresponding loan loss reserves. Publicly traded banks must comply with the standard in 2020. Banks have openly groused about the implications of the new guidance; many banks have questioned how they are supposed to forecast losses, and some banks say the new accounting will cause them to restrict lending as the economy sours to guard against piling up new losses.
Duhnke Wants Congress to Move First on Inspections of Broker-Dealer Auditors
PCAOB Chairman William Duhnke says the board is waiting for Congress to vote on a bill that scales back the audit requirements for broker-dealers before proposing a permanent inspection program for auditors of brokerage firms. “I think the current approach for the board is to allow the Congressional process to take place this year until the end of the session because there is some movement toward addressing it legislatively,” Duhnke said. “We are going to see if they do that, and if they don’t, we will put on our list of things to do pretty early next year to address what the program will be and how to structure it.” The SEC, which has oversight authority over the PCAOB, approves of a bill that was passed by the House Financial Services Committee and which exempts small broker-dealers that do not handle client funds from independent audits. SEC Chairman Jay Clayton told lawmakers during a hearing that he supports the measure.
Directors Appointed for Registration and Inspections, International Affairs
On November 1, the PCAOB named George Botic as director of its Division of Registration and Inspections and Liza McAndrew Moberg as director of the Office of International Affairs. Both have served as acting directors of their respective divisions since May 2018. Botic leads a key PCAOB division tasked with overseeing the registration and inspection of U.S. and foreign accounting firms that audit either public companies or broker-dealers. A former senior manager with PricewaterhouseCoopers, Botic came to the inspections division 15 years ago. After six years with the division, he became deputy director, leading the board’s inspections for audit firms not affiliated with large global networks, according to a PCAOB news release. He has also served as special adviser to the chairman and director of International Affairs, among other roles. McAndrew Moberg is a former staffer with the SEC, where she served as senior adviser to the director in the commission’s Office of International Affairs. In her role as permanent director, McAndrew Moberg will lead the board’s efforts “to advance cross-border engagement with others involved in investor protection efforts and to implement and maintain cooperative agreements that facilitate the PCAOB’s oversight activities outside of the U.S.,” according to a news release.