The FASB met on Wednesday, February 2 to discuss a CUNA-supported proposal to eliminate the TDR requirements for institutions that have adopted the CECL accounting standard. GAAP provided an exception for loan restructuring and refinancing if they meet specific criteria and classifies them as TDR. These loans are then subject to different accounting guidelines and often require complicated models to measure properly.
CECL models already measure all expected losses over the lifetime of the loan, which would include any loss due to a borrower experiencing financial difficulty. The proposal stated that because of this, TDR loans were already accounted for in CECL models. This change will require more detailed disclosure about modifications to these loans, but this generally should lower the overall complexity of managing and reporting credit union loan portfolios. Stay tuned for more details on these changes in the coming weeks!