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Financial Services Law Insights and Observations

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  • OCC updates bank accounting guidance

    Agency Rule-Making & Guidance

    On August 16, the OCC released an annual update to its Bank Accounting Advisory Series (BAAS). Intended to address a variety of accounting topics and promote consistent application of accounting standards and regulatory reporting among OCC-supervised banks, the BAAS reflects updates to accounting standards issued by the Financial Accounting Standards Board through March 31, 2021, related to, among other things, (i) the amortization of premiums on callable debt securities; and (ii) evaluating goodwill impairment triggering events for private companies. The 2021 edition also includes answers to frequently asked questions from industry and bank examiners. Additionally, the OCC notes that the BAAS does not represent OCC rules or regulations but rather “represents the Office of the Chief Accountant’s interpretations of generally accepted accounting principles and regulatory guidance based on the facts and circumstances presented.”

    Agency Rule-Making & Guidance OCC Supervision FASB Compliance

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  • SEC highlights the need for top-quality financial reporting due to Covid-19

    Federal Issues

    On April 3, the SEC Office of the Chief Accountant (OCA) released a statement regarding “the Importance of High-Quality Financial Reporting in Light of the Significant Impacts of COVID-19.” In the statement, the SEC Chief Accountant states that capital markets cannot function optimally without the free flow of “high quality financial information” that enables informed decision-making from lenders, investors, and other stakeholders. The statement points out that accounting and financial reporting may be challenging due to Covid-19 and that financial institutions may have to make “significant judgments and estimates,” but that the OCA does not intend to oppose “well-reasoned judgments.” Accounting areas that may require these judgments and estimates include (i) “[f]air value and impairment”; (ii) “[l]eases”; (iii) “[d]ebt modifications or restructuring”; (iv) “[h]edging”; (v) “[r]evenue recognition”; (vi) “[g]oing concern”; (vii) “[s]ubsequent events”; and (viii) “[a]doption of new accounting standards.” Regarding auditing, the OCA advises that auditor independence is of paramount importance to financial institutions and notes its willingness to consult on these issues. The statement also emphasizes the OCA’s engagement with the Financial Accounting Standards Board and the Public Company Accounting Oversight Board, as well as with international accounting groups regarding issues created by Covid-19. Finally, the OCA encourages those involved in the financial reporting system to collaborate, and reiterates the OCA’s willingness to answer Covid-19 related questions.

    Federal Issues SEC Agency Rule-Making & Guidance FASB CARES Act Covid-19 Securities

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  • FDIC asks FASB to delay CECL rules due to Covid-19

    Federal Issues

    On March 19, the FDIC sent a letter to the Financial Accounting Standards Board (FASB) encouraging FASB to delay transitions to and exclusions from certain accounting rules, including (i) excluding Covid-19-related modifications from being considered a concession when determining a troubled debt restructuring classification; (ii) permitting financial institutions an option to postpone implementation of the current expected credit losses (CECL) methodology given the current economic environment; and (iii) imposing a moratorium on the effective date for institutions that are not currently required to implement CECL to allow these financial institutions to focus on immediate business challenges relating to the impacts of Covid-19. CSBS issued a statement on March 20 announcing it fully supports the FDIC’s request, stating the delay will give banks additional time to focus on their customers.

    Federal Issues FDIC FASB Covid-19

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