Standards Setters Make Tough Decision on Credit Loss Rules
FASB voted on October 16 to finalize an August proposal that delays its credit loss standard only for smaller reporting companies, leaving the effective date for larger companies in place. The issue that has raised the ire of banking groups and U.S. legislators, who pushed for an indefinite deferral until further study is performed on the changes. The credit loss rules, which take effect for fiscal years beginning after December 15, 2019, for large public companies, require banks to forecast into the foreseeable future to predict losses over the life of a loan, and then immediately book those losses. The rules were issued in response to the 2007–2008 global financial crisis. Banking groups do not believe FASB’s prior extensive efforts to vet the rules are enough. The American Bankers Association, which represents the nation’s $18 trillion banking industry, told the board that the credit loss standard should be deferred indefinitely for all companies until a quantifying impact study can be performed that uses “expected bank practice, in light of regulatory supervision and auditing constructs. Regulator support can be reassessed at that time.”
New Rules Spurring Job Growth in Accounting Profession, Study Claims
The number of U.S. jobs for accountants, auditors, and financial specialists will continue to climb over the next five years, driven by new FASB standards, a new study finds. The 2020 Accounting & Finance Salary Guide, published by Accounting Principals, a division of Adecco Group, contends that much of the demand for accounting and finance professionals stems from new compliance standards. “New revenue recognition and lease accounting standards from the Financial Accounting Standards Board have created a need for professionals who can diagnose the need for new policies, revise existing procedures, update software, and install new accounting and finance systems,” the study explains. Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), went into effect for public companies in 2018, and takes effect this year for private companies. The guidance replaces a large body of industry-specific rules with a principles-based, five-step model for how companies report earnings obtained from the goods they sell or services they provide. The standard was issued in 2014.
Banking, Broker-Dealer, Other Groups Caution Against Added Disclosures for Rate Reform
A trio of industry groups representing the banking, broker-dealer, and global derivatives market have asked FASB not to require companies to provide added disclosures about the effects of rate reform, stating it would impose significant costs and effort to comply with. In comment letters, the Securities Industry and Financial Markets Association (SIFMA), the American Bankers Association (ABA), and the International Swaps and Derivatives Association (ISDA) said that adding new quantitative disclosures under GAAP would require the modification of financial reporting systems to capture data and develop implementation processes and controls that would only be relevant for a limited period. “We recommend that the Board limit the disclosures related to reference rate reform to those that are qualitative in nature, and we encourage the Board to allow entities to continue to make such disclosures in MD&A, rather than the footnotes to their financial statements,” the groups said.