Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429-9990
Financial Institution Letter
FIL-79-2016
December 19, 2016
NEW ACCOUNTING STANDARD ON CREDIT LOSSES: FREQUENTLY ASKED QUESTIONS
Summary: The federal financial institution regulatory agencies are issuing the attached Frequently Asked Questions
on the New Accounting Standard on Financial Instruments – Credit Losses to assist institutions and examiners. This
new standard, published by the Financial Accounting Standards Board (FASB) in June 2016, introduces the current
expected credit losses methodology (CECL) for estimating allowances for credit losses. The Frequently Asked
Questions (FAQs) focus on the application of CECL and related supervisory expectations. The issuance of the FAQs is
part of the agencies' efforts to support institutions as they prepare to implement CECL. The agencies plan to update the
FAQs periodically.
Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies
to all FDIC-supervised banks and savings associations, including community institutions.
Distribution:
FDIC-Supervised Banks (Commercial and
Savings) and FDIC-Supervised Savings
Associations
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Credit Officer
Related Topics:
FIL-39-2016, June 17, 2016, Joint Statement
on the New Accounting Standard on Financial
Instruments – Credit Losses
Attachment:
Frequently Asked Questions on the New
Accounting Standard on Financial Instruments
– Credit Losses - PDF (PDF Help)
Contact:
John Rieger, Deputy Chief Accountant, 202-898-
3602, jrieger@fdic.gov:
Christine Bouvier, Assistant Chief Accountant, 202-
898-7289, cbouvier@fdic.gov;
Kenneth Johnson, Examination Specialist, 678-
916-2197, kjohnson@fdic.gov;
Note:
FDIC Financial Institution Letters (FILs) may be
accessed from the FDIC's website
at https://www.fdic.gov/news/news/financial/2016/.
To receive FILs electronically,
visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies may be obtained through the FDIC's
Public Information Center, 3501 Fairfax Drive, E-
1002, Arlington, VA 22226 (877-275-3342 or 703-
562-2200).
Highlights:
CECL applies to all financial assets carried at amortized cost,
including loans held for investment and held-to-maturity debt
securities, and certain off-balance-sheet credit exposures such
as loan commitments and standby letters of credit. Although
CECL does not apply to available-for-sale debt securities, the
new accounting standard modifies the existing accounting for
impairment on such securities.
The FAQs address such topics as changes the new accounting
standard makes to existing U.S. generally accepted accounting
principles, the standard's effective dates, the application of the
standard upon initial adoption, acceptable allowance estimation
methods under CECL, and portfolio segmentation for credit loss
estimation on a collective basis.
The FAQs reiterate that CECL is scalable to institutions of all
sizes; community institutions are not expected to need to adopt
complex modeling techniques to implement the new accounting
standard; and institutions are not required to engage third-party
service providers to assist management in estimating credit loss
allowances under CECL.
Institutions are encouraged to plan and prepare for the transition
to and implementation of the new accounting standard, including
its potential impact on regulatory capital. The FAQs provide
examples of initial implementation activities. The agencies
expect institutions to make good faith efforts to implement the
new accounting standard in a sound and reasonable manner.
Institutions with specific questions about the new accounting
standard and the FAQs may submit them by e-mail
to CECL@fdic.gov.Inactive
550 17th Street NW, Washington, DC 20429-9990
Financial Institution Letter
FIL-79-2016
December 19, 2016
NEW ACCOUNTING STANDARD ON CREDIT LOSSES: FREQUENTLY ASKED QUESTIONS
Summary: The federal financial institution regulatory agencies are issuing the attached Frequently Asked Questions
on the New Accounting Standard on Financial Instruments – Credit Losses to assist institutions and examiners. This
new standard, published by the Financial Accounting Standards Board (FASB) in June 2016, introduces the current
expected credit losses methodology (CECL) for estimating allowances for credit losses. The Frequently Asked
Questions (FAQs) focus on the application of CECL and related supervisory expectations. The issuance of the FAQs is
part of the agencies' efforts to support institutions as they prepare to implement CECL. The agencies plan to update the
FAQs periodically.
Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies
to all FDIC-supervised banks and savings associations, including community institutions.
Distribution:
FDIC-Supervised Banks (Commercial and
Savings) and FDIC-Supervised Savings
Associations
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Credit Officer
Related Topics:
FIL-39-2016, June 17, 2016, Joint Statement
on the New Accounting Standard on Financial
Instruments – Credit Losses
Attachment:
Frequently Asked Questions on the New
Accounting Standard on Financial Instruments
– Credit Losses - PDF (PDF Help)
Contact:
John Rieger, Deputy Chief Accountant, 202-898-
3602, jrieger@fdic.gov:
Christine Bouvier, Assistant Chief Accountant, 202-
898-7289, cbouvier@fdic.gov;
Kenneth Johnson, Examination Specialist, 678-
916-2197, kjohnson@fdic.gov;
Note:
FDIC Financial Institution Letters (FILs) may be
accessed from the FDIC's website
at https://www.fdic.gov/news/news/financial/2016/.
To receive FILs electronically,
visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies may be obtained through the FDIC's
Public Information Center, 3501 Fairfax Drive, E-
1002, Arlington, VA 22226 (877-275-3342 or 703-
562-2200).
Highlights:
CECL applies to all financial assets carried at amortized cost,
including loans held for investment and held-to-maturity debt
securities, and certain off-balance-sheet credit exposures such
as loan commitments and standby letters of credit. Although
CECL does not apply to available-for-sale debt securities, the
new accounting standard modifies the existing accounting for
impairment on such securities.
The FAQs address such topics as changes the new accounting
standard makes to existing U.S. generally accepted accounting
principles, the standard's effective dates, the application of the
standard upon initial adoption, acceptable allowance estimation
methods under CECL, and portfolio segmentation for credit loss
estimation on a collective basis.
The FAQs reiterate that CECL is scalable to institutions of all
sizes; community institutions are not expected to need to adopt
complex modeling techniques to implement the new accounting
standard; and institutions are not required to engage third-party
service providers to assist management in estimating credit loss
allowances under CECL.
Institutions are encouraged to plan and prepare for the transition
to and implementation of the new accounting standard, including
its potential impact on regulatory capital. The FAQs provide
examples of initial implementation activities. The agencies
expect institutions to make good faith efforts to implement the
new accounting standard in a sound and reasonable manner.
Institutions with specific questions about the new accounting
standard and the FAQs may submit them by e-mail
to CECL@fdic.gov.Inactive