On Dec. 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the Act), which both funds the federal government until September 30, 2021 and broadly addresses additional COVID-19 responses and relief. Included among those relief provisions are certain extensions to elements of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) that address the application of U.S. GAAP by financial institutions. The provisions extending the relief are found in two sections within the Act’s Division N (Additional Coronavirus Response and Relief) – Title V (Banking) – Subtitle C (Miscellaneous).
Section 540 (Extensions of Temporary Relief and Emergency Authorities) amended Section 4014 of the CARES Act and further delays the required adoption of the FASB’s ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), including the current expected credit loss (CECL) model, by insured depository institutions, credit unions and bank holding companies. Those entities that have not previously adopted and were preparing to adopt on Dec. 31, 2020, now have until the earlier of a) the first day of the financial institution’s fiscal year that begins after the date on which the national COVID-19 emergency terminates or b) January 1, 2022 to adopt ASU 2016-13. This is effectively another year of deferral for calendar year end entities, which can now adopt for 2022.
Section 541 (Extension of Temporary Relief from Troubled Debt Restructurings and Insurer Clarification) also extends the period established by Section 4013 of the CARES Act under which consideration of troubled debt restructuring identification and accounting triggered by effects of the COVID-19 epidemic are suspended. That period is extended to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates. In addition, Section 541 amended the relief to expand beyond financial institutions to include insurance companies. The requirement that the subject specific loans not be more that 30 days past due as of December 31, 2019 was not changed.
While the Act has been signed by the President, registrants should consider that the week following the signing of the CARES Act in March 2020, the Securities and Exchange Commission’s Chief Accountant released a public statement  saying, in part:
"We also are working with market participants regarding the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act, which was signed into law by the President on March 27, 2020, allows a limited number of entities the option to temporarily defer or suspend the application of two provisions of U.S. Generally Accepted Accounting Principles (GAAP). OCA has received inquiries from preparers and auditors where the preparer has concluded that election of these narrow and limited options in Sections 4013 and 4014 of the CARES Act would be deemed to be in accordance with GAAP. For those entities that are eligible for, and elect to apply, either of Sections 4013 or 4014 of the CARES Act, the staff would not object to the conclusion that this is in accordance with GAAP for the periods for which such elections are available."
Registrants should closely monitor the SEC’s website to see whether additional guidance from the Office of the Chief Accountant is provided with the signing of the Act.
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