Submitted by Adam Davis, June 13, 2017
One year ago, on June 16, 2016, the Financial Accounting Standards Board issued ASU No. 2016-13 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments”, which introduced the current expected credit loss methodology for establishing allowances for credit losses. In the banking industry we have come to know this now by “CECL”. As a banker, you may be on your way to developing a plan or you may be like many and wondering when and how you should start.
We here at ProBank Austin wanted to provide a quick recap of CECL for those that are still in the planning stages and our thoughts on steps to be taking now to be prepared for implementation. If you have further questions or would like to discuss your institution’s plan for CECL, we are available to help. As always, it is the purpose of ProBank Austin to make formidable tasks more manageable for you and your staff.
Definition of a Public Business Entity (PBE), Per ASU No. 2013-12
A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity.
(a) It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing).
(b) It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC c. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer.
(c) It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.
(d) It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including footnotes) and make them publicly available on a periodic basis (for example, interim or
 Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency, “Joint Statement on the New Accounting Standard on Financial Instruments – Credit Losses,” June 17, 2016, https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20160617b1.pdf
 ASC 326-BC50: “While the range of reasonable outcomes is not unlimited, the Board concluded that it is rare that there will only be one acceptable choice in estimating credit losses.”
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