Two key updates were made for the simplified tool credit unions may use to determine the impact of credit loss accounting standards on their financial statements, their federal regulator said Thursday.
According to the National Credit Union Administration (NCUA), the changes for the simplified Current Expect Credit Loss (CECL) accounting tool incorporate a credit union’s December 2022 net charge-off values in the average three-year net charge-off rates. The changes also adjust weighted average life-of-loan factors for recent trends.
NCUA said the updates announced Thursday to its Simplified CECL tool (and for those in coming months) will allow a credit union to use the CECL accounting standard to estimate its allowance for credit losses on loans and leases.
The agency said it would issue quarterly updates so a credit union can incorporate them before its books are closed call report submissions are made.
“For most credit unions, CECL became effective at the start of 2023,” NCUA said in a statement. “For credit unions that started using the Simplified CECL Tool in the first part of 2023, the March 2023 release is used to determine the credit loss expense, or provision for credit losses, from the date of adopting CECL until March 31, 2023. For credit unions that adopted CECL in the first quarter of 2023, the March 2023 Call Report will include the day-one adjustment to undivided earnings and the credit loss expense since the date of CECL adoption.”