Accounting on the Move: What Recent Changes in US GAAP Accounting Mean for Borrowers and Lenders
A frequent speaker, instructor, advisor, and writer on credit risk and commercial banking topics and issues, Dev is principal of Devon Risk Advisory Group and engages in consulting, speaking and training on a wide range of risk, credit, and lending topics. As former SVP and senior credit policy officer at SunTrust Bank, Atlanta, he was responsible for developing, implementing, and administering credit policies for SunTrust's wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking, and private wealth management. He also spent three years as managing director and credit approver in SunTrust's Florida commercial lending and corporate investment banking areas, respectively. Prior to SunTrust, Dev was chief credit officer for Barnett Bank's Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, Dev's experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor in Hawaii, Missouri, and Florida. A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, he earned his M.B.A. from the University of Hawaii.
Dev serves as an instructor in RMA's Florida Commercial Lending School, the Stonier Graduate School of Banking, the Southwestern Graduate School of Banking, the Pacific Coast Banking School, and the American Bankers Association's (ABA) Commercial Lending. His school, conference, and workshop audiences have included participants drawn from the ABA, RMA, OCC, Federal Reserve, FDIC, FFIEC, SBA, the Institute of Management Accountants (IMA) and the AICPA.
Dev has written about credit risk management, financial analysis and related subjects for the ABA's Commercial Insights, the Risk Management Association's RMA Journal, and other business professional journals. He is the author of Analyzing Construction Contractors and its related RMA workshop. A past national chair of RMA and former Florida Chapter president, Dev serves as a member of the RMA Journal's advisory board, and an ex-officio board member of the Florida and Atlanta RMA chapters. He also serves on the advisory board of the Atlanta Chapter of the Professional Risk Managers' International Association (PRMIA), and he has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department's Financial Service Volunteer Corps (FSVC).
Much of the change in GAAP in recent years is the result of collaboration between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to bring the US and international accounting principles closer together. At some point, both groups decided they were as close as they would be likely to get on several key concepts—revenue recognition, lease capitalization, and CECL. In addition, FASB decided to revise financial statement disclosure for the large and growing not-for-profit segment of the American economy.
This session will explain these new concepts and how they affect borrowers and how lenders should incorporate these changes into their own analyses and underwriting of borrowers.
- Background of FASB and IASB accounting convergence
o Close, but no cigar
o Differences still exist
- Revenue recognition
o Seller recognizes revenue when a buyer gets possession of good or service
o Generally sooner than later
o More emphasis on gross revenues
- Lease capitalization
o Troublesome off-balance-sheet loophole finally plugged
o Whether operating or financing lease, both are capitalized
o Both lease liability and right of use (ROU) asset put on a balance sheet
o Higher leverage ratios, lower return on asset ratios
o Cash flow impacts
o Incurred loss replaced by loss over the life of a loan
o Higher probability of default
o CECL means higher provision for credit losses in financials of borrowers, not just bankers
o Balance sheet simplified
o More disclosure of liquidity
Course Level - Basic/Fundamental
Who Should Attend
- Credit Analysts
- Credit Managers
- Loan review officers
- Work-out officers
- Commercial Lenders
- Credit Risk Managers
- Chief Credit Officers
- Senior Lenders
- Senior Lending Officer
- Bank Director
- Chief Executive Officer
- Board Chairman
Why Should You Attend
We tend to take accounting for granted—debits equal credits, total assets equal total liabilities and stockholder’s equity. Generally accepted accounting principles (GAAP) are generally accepted because they do not change often, and when they do, there are good reasons for the change.
However, business and the economy do change over time, and several new principles warrant review to understand how they will affect both borrowers and lenders--new GAAP for revenue recognition, lease capitalization, currently expected credit losses (CECL) as well as changes to not-for-profit financials.