On November 19, 2019, the SEC staff published Staff Accounting Bulletin (SAB) 119 to provide interpretive guidance for registrants engaged in lending activities subject to the new credit losses standard.
The SEC staff added Section M, Financial Reporting Release No. 28 – Accounting for Loan Losses by Registrants Engaged in Lending Activities Subject to FASB ASC Topic 326, to Topic 6, Interpretations of Accounting Series Releases and Financial Reporting Releases, of the Staff Accounting Bulletin Series.
Section M updates certain portions of existing guidance to align the staff’s interpretive guidance with the amended Financial Accounting Standards Board (FASB) guidance in Topic 326, which replaces the existing incurred loss model for determining the allowance for loan losses with an expected credit loss model.
Similar to existing staff interpretive guidance in SAB 102, the amended guidance in SAB 119 continues to focus on the documentation the staff would expect registrants engaged in lending activities to prepare and maintain to support estimates of current expected credit losses for loan transactions.
Effective Dates
The updated interpretive guidance became effective as of November 25, 2019, but is applicable upon a registrant’s adoption of Topic 326. The SEC staff’s amended interpretive guidance doesn’t accelerate or delay the effective dates of Topic 326.
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