Community Bank Petition to the Financial Accounting Foundation and the Financial Accounting Standards Board
Financial Instruments-Credit Losses-Subtopic 825-15
We, the undersigned community bank chief executive officers, presidents, directors, employees, business partners and customers, hereby submit this petition to urge the Financial Accounting Foundation and the Financial Accounting Standards Board to withdraw their accounting standards proposal concerning credit losses (Financial Instruments-Credit Losses-Subtopic 825-15), which would shift the recognition of credit losses from the current incurred loss model to a much more complicated expected loss model. We urge the FAF and FASB to re-propose a simpler and more straightforward proposal that would not harm the nation’s more than 6,500 community banks and Main Street, USA.
We believe the following:
The Financial Accounting Standards Board should re-propose a simpler, more straightforward credit loss approach for all banks and bank holding companies with total consolidated assets of $10 billion or less. The alternative credit loss model should require a community bank to recognize credit losses ratably over the life of the loan using historical credit losses experienced by the institution or by a peer group. Upon the occurrence of an incurred loss event where the occurrence of a credit loss is probable, the historical credit loss model would be replaced by the incurred loss model for the impaired asset only.
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