Insights and Resources
COVID-19: Clarification on interagency statement on loan modifications
FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
On December 1, 2020, representatives of the Chief Accountant’s offices of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation presented at the American Institute of Certified Public Accountants Online Update on Banks & Savings Institutions. Their presentation provided clarification as to the application of a revised interagency statement issued on April 7, 2020 that provided financial reporting information to financial institutions that are working with borrowers affected by COVID-19.
Specifically, the revised interagency statement provides relief from accounting for loan modifications as troubled debt restructurings as defined in Subtopic 310-40, "Receivables – Troubled Debt Restructurings by Creditors," of the Financial Accounting Standards Board's Accounting Standards Codification when the following conditions are met:
- The modification request is in response to financial or operational difficulties experienced by the borrower as a result of COVID-19;
- The modification is short-term in nature (e.g., six-month, cumulative basis), including payment deferrals, fee waivers, extensions of repayment terms or other delays in payment that are insignificant for borrowers; and
- The borrower was considered current (less than 30 days past due on their contractual payments) at the time the modification program was implemented.
During the December 1, 2020 presentation, the representatives confirmed that this guidance may be applied into calendar year 2021. Additionally, they discussed that the “time the modification program was implemented” may be measured as either the date of the modification of an individual loan or a specific program’s implementation date. This interpretation also aligns with the August 2020 Joint Statement on Additional Loan Modifications Related to COVID-19, which provides a sample scenario for applying the conditions in the revised interagency statement to a subsequent modification and defines “current” as less than 30 days past due on all contractual obligations at the time of the subsequent modification.
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2020-12-02.
2020 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.