ITC Agenda Consultation Letter

Mr. Richard R. Jones
Chairman
Financial Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116

Via email: [email protected]

Dear Chairman Jones:

The American Bankers Association (ABA) welcomes the opportunity to comment on the Invitation to Comment - Agenda Consultation (ITC). The ITC seeks feedback on several major areas that FASB is considering to add to its project agenda. As both users and preparers of financial statements, bankers have a keen interest in FASB’s agenda.

ABA strongly supports the current projects on the agenda to improve the accounting for Troubled Debt Restructurings (TDRs) and to simplify the subsequent accounting for goodwill. These projects should take immediate priority within FASB’s agenda.

The project to improve the accounting for TDRs will consider eliminating TDRs for entities that have adopted Accounting Standards Update 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”). Under CECL, TDRs have significantly diminished relevance and many users of financial statements have provided feedback to FASB that TDRs do not provide decision-useful information. Under an expected credit loss accounting model, the impact of concessions that would result in a TDR are already captured. In addition, TDR accounting is operationally burdensome. Therefore, prioritizing this project will likely provide timely operational relief to lenders while reducing confusion among investors and maintaining quality disclosure. 

Goodwill is excluded from a bank’s regulatory capital, so the current accounting and impairment process ends up being, for many banks, an arduous process that often provides little value to our investors and supervisors. Banks are also users of the financial statements in making credit decisions. Credit decisions related to a borrower’s assets are based primarily on the assets that generate cash flows or that can be readily liquidated. Goodwill and its subsequent accounting are generally ignored when making those decisions. Prioritizing this project on the subsequent accounting for goodwill will likely provide operational relief to many companies.

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