Credit Loss Standard (CECL) Issues

Identified Credit Loss Implementation Issues

Credit loss implementation issues identified by the Depository Institutions and Insurance Expert Panel members, when available, will be posted here. Full credit loss implementation issues will be posted below for informal comments after review by the AICPA Financial Reporting Executive Committee (FinREC).

Staff Contact: Jason T. Brodmerkel, Jason.Brodmerkel@aicpa-cima.com

Feedback Requested: Respondents should submit any comments including the implementation issue number to Jason.Brodmerkel@aicpa-cima.com by the dates noted below:

Ref. Description of Implementation Issue Status
1 Issue #1: Zero Expected Credit Losses- This issue paper focuses on specific examples that might qualify as instruments that may be considered to have zero expected credit losses.  These examples are limited to: US Treasury Securities, Ginnie Mae Mortgage-Backed Securities, and Agency Mortgage-Backed Securities.  Comment Period ended October 10, 2018. Final version available on the Online Publication Library.  Link here for purchase of the Online Subscription to view the final version. 
2 Issue #2: Determining the "Estimated Life" of a Credit Card Receivable. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 5 hyperlinked here). Issues included: appropriate application of the CARD act,  expected payments to a revolving credit card receivable, estimation of the amount and timing of payments expected to be collected, to name a few.   Resolved during the FASB October 12, 2017 FASB Board Meeting.

An Issue Paper has been developed to document these results for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
3 Issue #3: Discounting Expected Cash Flows Using an Entity's Effective Interest Rate: This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 1 hyperlinked here).  Issues included: consideration of prepayments when discounting expected cash flows, appropriate use of  EIR, and appropriate use of an adjusted EIR, to name a few.  Resolved during FASB December 13, 2017 meeting. Codification changes made by FASB.
4 Issue #4: Transfer of Loans from Held for Sale to Loans Held for Investment and Transfer of Credit Impaired Debt Securities from Available-for-Sale (AFS) to Held-to-Maturity (HTM). This topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 10 hyperlinked here). Issues included: transferring debt securities with recorded credit losses from AFS to HTM, transferring an HFS loan to an HFI loan, and presentation and disclosures of transfers between categories, to name a few.  Resolved during the FASB August 29, 2018 FASB Board Meeting. Codification changes made by FASB.
5 Issue #5: Scope of Purchased Financial Assets with Credit Deterioration Guidance for Beneficial Interests within Subtopic 325-40. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 2 hyperlinked here). Issues included: Scoping and determination of contractual cash flows when assessing beneficial interests.  Resolved during the June 12, 2017 FASB TRG Meeting.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
6 Issue #6: Reasonable & Supportable Forecasting. This topic includes the appropriate considerations when: developing a reasonable and supportable forecast period, use of historical loss information within the reasonable and supportable forecast period, and transition from reasonable and supportable forecast period to reversion, to name a few.  Comment Period ended December 31, 2018. Final version available on the Online Publication Library.  Link here for purchase of the Online Subscription to view the final version. 
7 Issue #7: Accounting for Troubled Debt Restructurings. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 4 hyperlinked here).  This topic includes consideration of information that is relevant to assessing the troubled debt restructuring including reasonably expected TDRs. Resolved during the September 2017 FASB Meeting Minutes.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
8 Issue #8: Transition Guidance for Pools of Financial Assets Accounted for under Subtopic 310-30. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 3 hyperlinked here). This topic includes: the appropriate application of maintaining pools accounted for under Subtopic 310-30 at adoption as well as ongoing basis.  Resolved during the June 12, 2017 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
9 Issue #9: Auditing Accounting Estimates, including Fair Value Accounting Estimates and Related Disclosures. This was a IAASB document developed in consideration of auditing IFRS 9. The Credit Losses Task Force has utilized this document in discussions and considerations when it discusses auditing the new Credit Losses Standard. Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Allowance for Credit Losses- Audit Considerations- A Practice Aid and Credit Losses A&A Guide available in the future. 
10 Issue #10: Auditing the new Credit Loss Standard. This topic includes auditing considerations when auditing the new standard. Issue papers have been previously developed by the Credit Loss Task Force level only.  These papers have been compiled and a forthcoming Practice Aid will be made available in a draft format.  Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Allowance for Credit Losses- Audit Considerations- A Practice Aid and Credit Losses A&A Guide available in the future. 
11 Issue #11: Simplifying Assumptions from Preparers. This was a paper provided by the American Bankers Association that considered multiple simplifying assumptions for preparers when implementing the new standard. The Task Force discussed this topic internally only. No final consensus was determined on this topic at this time.  Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Allowance for Credit Losses- Audit Considerations- A Practice Aid and Credit Losses A&A Guide available in the future. 
12 Issue #12: Financial Assets Secured by Collateral Maintenance Provisions: The guidance in paragraph 326-20- 35-6 for financial assets secured by collateral maintenance provisions provides a practical expedient to measure the estimate of expected credit losses by comparing the amortized cost basis of a financial asset and the fair value of collateral securing the financial asset as of the reporting date. Stakeholders questioned whether an entity is required to evaluate whether a borrower has the ability to continually replenish collateral securing the financial asset to apply the practical expedient. Additionally, stakeholders questioned how an entity should determine its estimate of expected credit losses if the fair value of the collateral securing the financial asset is less than its amortized cost basis.  Proposed Codification Changes made by the FASB. Comment period ends July 29, 2019.
13 Issue #13: Consideration of Accrued Interest- this topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 9 hyperlinked here). Issues included: the inclusion of accrued interest in the definition of amortized cost basis and reversal of accrued interest on nonaccrual loans, to name a few.  Resolved during the FASB August 29, 2018 FASB Board Meeting. Codification changes made by the FASB.
14 Issue #14: Recoveries- This topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 11 hyperlinked here). Issues included: the consideration of expected recoveries in both individual and pooled assets, the application of expected recoveries within either the calculation or directly at the asset level, appropriateness of recoveries that may exceed the amortized cost basis,  to name a few.  Resolved during the FASB November 7, 2018 FASB Board Meeting.  Codification changes made by FASB.
15 Issue #15: Discount Rates for Variable Rate Loans. Issues included: appropriate projections of changes in the independent factor or factors that determine the contractual interest rate on a variable rate financial asset for the purposes of determining the EIR and estimating expected future cash flows.  Resolved during FASB December 13, 2017 meeting. Codification changes made by FASB.
16 Issue #16: Accounting for Recoveries on Credit Insurance Contracts- Issues include: the appropriate recognition threshold and measurement model that should be used for a freestanding credit insurance contracts (not accounted for as a derivative under Topic 815).  An Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
17 Issue #17: Application of Subsequent Events - Issues include: When and how should subsequent events be reflected when applying FASB ASC 326. See SEC staff speech from the AICPA Banking Conference for further details. The FASB addressed this issue in their December 13, 2017 Board Meeting and SEC Staff addressed this during their Remarks before the 2018 AICPA Conference on Current SEC and PCAOB Developments on December 10, 2018.

An Issue Paper has been developed to document the results of the FASB Board meeting and the SEC speech for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
18 Issue #18: Review of ABA Discussion Paper: “Analyzing Current Loan Performance Under CECL. ”  AICPA Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
19 Issue #19: Review of ABA Discussion Paper, “CECL Effective Date for Private Banks.” AICPA Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
20 Issue #20: Contractual Term: Extensions: Considering the Life: Issues include questions of whether entity may consider certain extension options when determining the contractual term of a financial asset in the scope of Subtopic 326-20. See memo 15 hyperlinked here for further details. Resolved during FASB November 7, 2018 Board meeting. Codification changes made by FASB.
21 Issue #21: Inclusion of Future Advances of Taxes and Insurance Payments in Estimates: Issues include: if a lenders’ expectations of future losses on payments of tax, insurance premiums, and other “costs” (i.e., payments made by lenders that may not be recovered from borrowers) should be included in the estimate of expected lifetime credit losses prior to the lender advancing the funds or incurring the costs.  Out for Exposure. Comments due back by October 15, 2019.
22 Issue #22: Reversion Method: Estimation vs Accounting Policy: Issues include: when determining whether a reversion technique used, if any, in estimating expected credit losses is an accounting estimation technique or  accounting policy election.  Comment Period ended October 10, 2018. Final version available on the Online Publication Library.  Link here for purchase of the Online Subscription to view the final version. 
23 Issue #23: Zero Expected Credit Loss Factors for Secured Financial Assets Secured by Collateral. Issues include: What circumstances and factors would it be appropriate to have no allowance for credit losses on secured financial assets.  Out for Exposure. Comments due back by October 15, 2019.
24 Issue #24: Refinancing and Prepayments. Issues include: whether entities are required to use the loan refinancing or restructuring guidance in FASB ASC 310-20-35-9 through 35-12 to determine what constitutes a prepayment for the purposes of the expected credit losses measurement. Memo #12 covers the discussion hyperlinked here. Resolved during the FASB August 29, 2018 FASB Board Meeting.

An Issue Paper has been developed to document the results of the FASB Board meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process. 
25 Issue #25: Implementation Dates For Non-PBEs. Questions have arisen regarding the implementation date timing for non-public business entities. Resolved during the FASB July 25, 2018 FASB Board Meeting. Codification changes made by FASB.
26 Issue #26: Capitalized Interest. Issues include: Considerations over capitalized interest when estimating the expected credit loss using a method other than a discounted cash flow method. Memo 8 covers the discussion hyperlinked here.  Resolved during the FASB August 29, 2018 FASB Board Meeting.

An Issue Paper has been developed to document the results of the FASB Board meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
27 Issue #27: Fair Value Option: Questions surrounding the one-time election to apply the FVO upon adoption of the standard. This discussion was considered within the scope of Memo 17 regarding recoveries hyperlinked here.
Resolved during FASB November 7, 2018 board meeting. Codification changes made by FASB.
28 Issue #28: Scope Exception for Loans and Receivables between Entities under Common Control. Issues include: does the scope exception for loans and receivables between entities under common control apply to US GAAP reporting at the subsidiary standalone level? See memo 7 hyperlinked here for further details. Out for Exposure. Comments due back by October 15, 2019.
29 Issue #29: Gains and Losses on Subsequent Disposition of Leased Assets: Issue included a technical inquiry question over how should expected gains and losses on the subsequent disposition of leased assets be treated when measuring expected losses.  See memo 7 hyperlinked here for further details. Resolved during the June 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
30 Issue #30: Billed Operating Lease Receivables- Issues include a question regarding the application of billed operating lease receivables within FASB ASC 326. See memo 7 hyperlinked here for further details. Resolved during the FASB July 25, 2018 FASB Board Meeting. Codification changes made by FASB.
31 Issue #31: Shorter Term Loans: Developing a Model for a 1-year loan that has a 3-Year Project Term: Issues include: whether an entity is precluded from considering future economic and other conditions  beyond the contractual term of a financial asset. See memo 15 hyperlinked here for further details. Resolved during the November 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
32 Issue #32: Partial Discounting: Issues included whether discounting certain inputs when using a method other than a DCF method in determining expected credit losses is acceptable. Overall November 2018 agenda discusses this issue hyperlinked here.  Resolved during the November 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
33 Issue #33: Accounting for Changes in FX Within Available for Sale Securities. Issue included: accounting for unrealized losses resulting from changes in foreign exchange rates for foreign-currency-denominated AFS debt securities. Overall November 2018 agenda discusses this issue hyperlinked here.  Resolved during the November 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
34 Issue #34: Zero Expected Credit Losses for Unsecuritized assets (including reinsurance receivables).  This issue paper focuses on a limited set of products and examples and their potential indicators for zero loss surrounding unsecuritized assets. Issue Paper is being developed. This paper will be available to the public in the future during the comment period process. 
35 Issue #35: Application of 325-40 for Trading Securities. Should an entity maintain an allowance for credit losses for a beneficial interest within the scope of Subtopic 325-40 that is classified as trading? Overall November 2018 agenda discusses this issue hyperlinked here. Resolved during the November 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
36 Issue #36: Vintage Disclosures: Issues include whether entities should be required to make disclosures with respect to the presentation of revolving loans that have converted to term (and other potential required disclosures). Memo #16 linked here discusses this issue further. Resolved during FASB November 7, 2018 Board meeting. Codification changes made by FASB.
37 Issue #37: Subsequent Events Factors: Issues include: A discussion regarding factors that might signify subsequents and how to appropriately apply them under FASB ASC 326.  An Issue Paper is being developed. This paper will be available to the public in the future during the comment period process. 
38 Issue #38: Recognition of Subsequent Increases in Fair Value of Collateral for Collateral Dependent Loans. Issues include: an entity's recognition of  subsequent increases in fair value for a collateral dependent loan prior to the sale or final disposition of the collateral. This was discussed in Memo 17 hyperlinked here.  Resolved during the November 1, 2018 FASB TRG Meeting. Meeting Minutes hyperlinked here.

An Issue Paper has been developed to document the results of the FASB TRG meeting for the AICPA Credit Losses A&A Guide. This paper will be available to the public in the future during the comment period process.
39 Negative Allowance for Purchased Financial Assets with Credit Deterioration- Stakeholders questioned whether negative allowances were permitted on PCD assets. The phrase negative allowance is used to describe situations for which an entity recognized a full, or partial, writeoff of the amortized cost basis of a financial asset and subsequently determines that the amount written off, or a portion of that amount, will be recovered. Said differently, an entity may determine that it will recover the amortized cost basis, or a portion of that basis, after a writeoff and that “basis recovery” is included in the allowance for credit losses through a negative allowance. Those situations often are a result of an entity applying regulatory charge-off policies that are generally based on delinquency status.  Proposed Codification Changes made by the FASB. Comment period ends July 29, 2019.

The proposed amendments would clarify that an entity should include expected recoveries of the amortized cost basis previously written off or expected to be written off in the valuation account for PCD assets. The proposed amendments also would clarify that recoveries or expected recoveries of the unamortized noncredit discount or premium should not be included in the allowance for credit losses. 
40 Transition Relief for Troubled Debt Restructurings- At the June 2017 Credit Losses Transition Resource Group (TRG) meeting, stakeholders noted the operational complexities of calculating a prepayment-adjusted effective interest rate on troubled debt restructurings (TDRs) that exist as of the adoption date by using the prepayment assumptions in effect
immediately before the restructuring. They requested transition relief when adjusting the effective interest rate for
those arrangements. 
Proposed Codification Changes made by the FASB. Comment period ends July 29, 2019.

The proposed amendments would provide transition relief by permitting entities to adjust the effective interest rate on existing TDRs using prepayment assumptions on the date of adoption of Topic 326 rather than the prepayment assumptions in effect immediately before the restructuring.
41 Disclosures Related to Accrued Interest Receivables- Stakeholders noted that an entity would still be required to include accrued interest in other disclosure requirements of its amortized cost basis for financial assets under other Topics. Stakeholders requested that the disclosure relief for accrued interest receivable balances be extended to all relevant disclosures involving amortized cost basis. Proposed Codification Changes made by the FASB. Comment period ends July 29, 2019.

The proposed amendments would extend the disclosure relief for accrued interest receivable balances to additional relevant disclosures involving amortized cost basis.
42 Conforming Amendment to Subtopic 805-20- Stakeholders noted that paragraph 805-20-50-1 references Subtopic
310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality, which was superseded by the amendments in Update 2016-13. 
Proposed Codification Changes made by the FASB. Comment period ends July 29, 2019.

The proposed amendment would clarify the guidance by removing the cross-reference to Subtopic 310-30 in paragraph 805-20-50-1 and replacing it with a cross-reference to the guidance on PCD assets in Subtopic 326-20. 
43 Targeted Transition Relief for Fair Value Option-  The amendments in this proposed Update would provide entities with the option to irrevocably elect the fair value option for eligible instruments that are within the scope of Subtopic 326-20, except for held-to-maturity debt securities, upon adopting Topic 326. The proposed amendments would not change any of the principles described in the amendments in Update 2016-13 or Subtopic 825-10. The amendments for targeted transition relief in this proposed Update would provide entities with an additional election date upon adoption of Topic 326 to elect the fair value option in accordance with Subtopic 825-10.  Proposed Codification Changes made by the FASB. Comment period ended March 8, 2019.


The Depository and Lending Institutions Expert Panel recommends the following AICPA products for current credit loss issues:

AICPA Audit and Accounting Guide Depository and Lending Institutions