Accounting Policies |
12 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||
| Accounting Policies [Abstract] | |||||||||||||
| Accounting Policies |
1. Accounting Policies
Basis of Presentation – The consolidated financial statements include Community Trust Bancorp,
Inc. (“CTBI”) and our subsidiaries, including our principal subsidiary, Community Trust Bank, Inc. (“CTB”). Intercompany transactions and accounts have been eliminated in consolidation.
Nature of Operations – Substantially all assets, liabilities, revenues, and expenses are related
to banking operations, including lending, investing of funds, obtaining of deposits, trust and wealth management operations, full service brokerage operations, and other financing activities. All of our business offices and the majority of our
business are located in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee.
Use of Estimates – In preparing the consolidated financial statements, management must make
certain estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues, and expenses, as well as affecting the disclosures provided. Future results could differ from the current estimates.
Such estimates include, but are not limited to, the allowance for credit losses, goodwill, the valuation of deferred tax assets, and the valuation of financial instruments.
The accompanying financial statements have been prepared using values and information currently available to CTBI.
Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could
change rapidly, resulting in material future adjustments in asset values, the allowance for credit losses, and capital.
Cash and Cash Equivalents – CTBI considers all liquid investments with original maturities of
three months or less to be cash equivalents. Cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits in other financial institutions, and federal funds sold. Generally, federal funds are sold for one-day
periods.
Certificates of Deposit in Other Banks
– Certificates of deposit in other banks generally mature within 18 months and are carried at cost.
Investments – Management determines the classification
of securities at purchase. We classify debt securities into held-to-maturity, trading, or available-for-sale categories. Held-to-maturity (“HTM”) securities are those which we have the positive intent and ability to hold to maturity and are
reported at amortized cost. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, Investments – Debt Securities, investments in debt securities that
are not classified as held-to-maturity shall be classified in one of the following categories and measured at fair value in the statement of financial position:
a. Trading securities. Securities that are bought and held principally for the purpose of selling
them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are
generally used with the objective of generating profits on short-term differences in price.
b. Available-for-sale securities. Investments not classified as trading securities (nor as HTM securities) shall be classified as
available-for-sale securities.
We do not have any securities that are classified as trading securities. Available-for-sale (“AFS”) securities are reported at fair value, with unrealized
gains and losses included as a separate component of shareholders’ equity, net of tax. If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income
for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.
Gains or losses on disposition of debt securities are computed by specific identification for those securities. Interest and dividend
income, adjusted by amortization of purchase premium or discount, is included in earnings.
An allowance is recognized for credit losses relative to AFS securities rather than as a reduction in the cost basis of the security.
Subsequent improvements in credit quality or reductions in estimated credit losses are recognized immediately as a reversal of the previously recorded allowance, which aligns the income statement recognition of credit losses with the reporting period
in which changes occur.
HTM securities are subject to an allowance for lifetime expected credit losses, determined by adjusting historical loss information for
current conditions and reasonable and supportable forecasts. The forward-looking evaluation of lifetime expected losses will be performed on a pooled basis for debt securities that share similar risk characteristics. These allowances for expected
losses must be made by the holder of the HTM debt security when the security is purchased. At December 31, 2021, CTBI held no securities
designated as held-to-maturity.
CTBI accounts for equity securities in accordance with ASC 321, Investments – Equity Securities.
ASC 321 requires equity investments (except those accounted for under the equity method and those that result in the consolidation of the investee) to be measured at fair value, with changes in fair values recognized in net income.
Equity securities with a readily determinable fair value are required to be measured at fair value, with changes in fair value
recognized through net income. Equity securities without a readily determinable fair value are carried at cost, less any impairment, if any, plus or minus changes resulting from observable price changes for identical or similar investments. As
permitted by ASC 321-10-35-2, CTBI can make an irrevocable election to subsequently measure an equity security without a readily determinable fair value, and all identical or similar investments of the same issuer, including future purchases of
identical or similar investments of the same issuer, at fair value. CTBI has made this election for our Visa Class B equity securities. The fair value of these securities was determined by a third party service provider using Level 3 inputs as
defined in ASC 820, Fair Value Measurement, and changes in fair value are recognized in income.
Loans – Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an
allowance for credit losses, and unamortized deferred fees or costs and premiums. Income is recorded on the level yield basis. Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral
value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Any loan greater than 90 days
past due must be well secured and in the process of collection to continue accruing interest. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is
reasonably assured. Loans are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months,
and future payments appear reasonably certain. A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to
the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) included an election for banking institutions to not apply the
guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19
national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The ability to exclude COVID-19-related modifications as troubled debt restructurings was extended
under the Consolidated Appropriations Act 2021 to the earlier of (i) 60 days after the COVID-19 national emergency and (ii) January 1, 2022. CTBI elected to adopt these provisions of the CARES Act, as extended by the Consolidated Appropriations Act
2021.
Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the
estimated life of the related loans, or commitments as a yield adjustment.
Leases – CTBI accounts for leases
under ASC 842, recording a right-of-use asset and a lease liability for all leases with terms longer than 12 months. The right-of-use asset represents the right to use the asset under lease for the lease term, and the lease liability represents the
contractual obligation to make lease payments. The right-of-use asset is tested for impairment whenever events or changes in circumstances indicate the carrying value might not be recoverable. Leases are classified as either finance or operating,
with classification affecting the pattern of expense recognition in the income statement. A lease is treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are
conveyed without the transfer of control, the lease is treated as a financing. If the lessor does not convey risks and rewards or control, an operating lease results. Right-of-use assets and lease liabilities are recognized at lease commencement
based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate on a collateralized basis, over a similar term at the lease commencement date. Right-of-use assets are further adjusted
for prepaid rent, lease incentives, and initial direct costs, if any.
Allowance for Credit Losses – CTBI accounts for the allowance for credit losses under ASC 326, commonly
known as CECL. CTBI measures expected credit losses of financial assets on a collective (pool) basis using loss-rate methods when the financial assets share similar risk characteristics. Loans that do not share risk characteristics are evaluated
on an individual basis. Regardless of an initial measurement method, once it is determined that foreclosure is probable, the allowance for credit losses is measured based on the fair value of the collateral as of the measurement date. As a
practical expedient, the fair value of the collateral may be used for a loan when determining the allowance for credit losses for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the
borrower is experiencing financial difficulty. The fair value shall be adjusted for selling costs when foreclosure is probable. For collateral-dependent financial assets, the credit loss expected may be zero if the fair value less costs to sell
exceed the amortized cost of the loan. Loans shall not be included in both collective assessments and individual assessments.
In the event that collection of principal becomes uncertain, CTBI has policies in place to reverse accrued interest in a timely manner. Therefore, CTBI elected
Accounting Standards Update (“ASU”) 2019-04 which allows that accrued interest would continue to be presented separately and not part of the amortized cost of the loan. The methodology used by CTBI is developed using the current loan balance,
which is then compared to amortized cost balances to analyze the impact. The difference in amortized cost basis versus consideration of loan balances impacts the allowance for credit losses calculation by one basis point and is considered immaterial. The primary difference is for indirect lending premiums.
We maintain an allowance for credit losses (“ACL”) at a level that is appropriate to cover estimated credit losses on individually evaluated loans, as well as estimated credit losses inherent in the
remainder of the loan and lease portfolio. Credit losses are charged and recoveries are credited to the ACL.
We utilize an
internal risk grading system for commercial credits. Those credits that meet the following criteria are subject to individual evaluation: the loan has an outstanding bank share balance of $1 million or greater and meets one of the following criteria: (i) has a criticized risk rating, (ii) is in nonaccrual status, (iii) is a troubled debt restructuring
(“TDR”), or (iv) is 90 days or more past due. The borrower’s cash flow, adequacy of collateral coverage, and other options available to
CTBI, including legal remedies, are evaluated. We evaluate the collectability of both principal and interest when assessing the need for loss provision. Historical loss rates are analyzed and applied to other commercial loan segments not subject to
individual evaluation.
Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ACL for these loans is measured in pools with similar risk characteristics under ASC 326.
When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made. If the balance of the loan exceeds the fair value of the collateral, the loan is
placed on nonaccrual and the loan is charged down to the value of the collateral less estimated cost to sell. For commercial loans greater than $1
million and classified as criticized, troubled debt restructuring, or nonaccrual, a specific reserve is established if a loss is determined to be possible and then charged-off once it is probable. When the foreclosed collateral has been legally
assigned to CTBI, the estimated fair value of the collateral less costs to sell is then transferred to other real estate owned or other repossessed assets, and a charge-off is taken for any remaining balance. When any unsecured commercial loan is
considered uncollectable the loan is charged off no later than at 90 days past due.
All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (5 monthly payments) delinquent. If a loan is considered
uncollectable, it is charged off earlier than 120 days delinquent. For conventional 1-4 family residential loans and installment and
revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made. If
the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual. Foreclosure proceedings are normally initiated after 120 days. When the foreclosed property has been legally assigned to CTBI, the fair value less estimated costs to sell is transferred to other real estate owned and the remaining balance is taken as a charge-off.
Historical loss rates for loans are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. With the implementation of ASC 326, weighted average life (“WAL”)
calculations were completed as a tool to determine the life of CTBI’s various loan segments. Vintage modeling was used to determine the life of loan losses for consumer and residential real estate loans. Static pool modeling was used to determine
the life of loan losses for commercial loan segments. Qualitative factors used to derive CTBI’s total ACL include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of
underperforming loans, trends in loan losses, and underwriting exceptions. Forecasting factors including unemployment rates and industry specific forecasts for industries in which our total exposure is 5% of capital or greater are also included as factors in the ACL model. Management continually reevaluates the other subjective factors included in our ACL analysis.
Loans Held for Sale – Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate.
Net unrealized losses, if any, are recognized by charges to income. Gains and losses on loan sales are recorded in noninterest income.
Premises and Equipment – Premises
and equipment are stated at cost less accumulated depreciation and amortization. Premises and equipment are evaluated for impairment on a quarterly basis.
Depreciation and amortization are computed primarily using the straight-line method. Estimated useful lives range up to 40 years for buildings, 2 to 10 years for furniture, fixtures, and equipment, and up to the lease term for leasehold improvements.
Federal Home Loan Bank and Federal
Reserve Stock – CTB is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors and may invest additional amounts. FHLB stock is carried
at cost, classified as a restricted security, and periodically evaluated for impairment based on the ultimate recovery par value. Both cash and stock dividends are reported as income.
CTB is also a member of its regional Federal Reserve Bank. Federal Reserve Bank stock is carried at cost, classified as a restricted
security, and periodically evaluated for impairment based on the ultimate recovery par value. Both cash and stock dividends are reported as income.
Troubled Debt Restructurings – Troubled
debt restructurings are certain loans that have been modified where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could
include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and
circumstances. Loan modifications that are included as troubled debt restructurings may involve either an increase or reduction of the interest rate, extension of the term of the loan, or deferral of principal and/or interest payments, regardless of
the period of the modification. All of the loans identified as troubled debt restructuring were modified due to financial stress of the borrower. In order to determine if a borrower is experiencing financial difficulty, an evaluation is performed to
determine the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under CTBI’s internal underwriting policy.
When we modify loans and leases in a troubled debt restructuring, we evaluate any possible impairment based on the present value of
expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determined that the value of the
modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.
In periods subsequent to modification, we evaluate troubled debt restructurings, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.
Other Real Estate Owned – When
foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current fair market value less expected sales costs. Additionally, periodic updated appraisals are obtained on unsold foreclosed properties. When an
updated appraisal reflects a fair market value below the current book value, a charge is booked to current earnings to reduce the property to its new fair market value less expected sales costs. Our policy for determining the frequency of periodic
reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months. All revenues and expenses related to the carrying of other real estate owned are
recognized through the income statement.
Goodwill and Core Deposit Intangible – We evaluate total goodwill and core deposit intangible for impairment, based upon ASC 350, Intangibles-Goodwill and Other, using fair value techniques including multiples of price/equity. Goodwill and core deposit intangible are evaluated for impairment on an annual basis or as other
events may warrant.
The balance of goodwill, at $65.5
million, has not changed since January 1, 2015. Our core deposit intangible has been fully amortized since December 31, 2017.
Transfers of Financial Assets – Transfers of financial
assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from CTBI—put presumptively beyond the reach of the transferor
and its creditors, even in bankruptcy or other receivership, (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) CTBI does not
maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.
Revenue Recognition – The majority of our revenue-generating transactions are not subject to ASC
606, including revenue generated from financial instruments, such as our loans, letters of credit, and investment securities, as well as revenue related to our mortgage banking activities, as these activities are subject to other generally accepted
accounting principles (“GAAP”) discussed elsewhere within our disclosures. Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of noninterest income are
as follows:
Income Taxes – Income tax expense is based on the taxes due on the consolidated tax return plus
deferred taxes based on the expected future tax benefits and consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates. Any interest and penalties incurred in connection with
income taxes are recorded as a component of income tax expense in the consolidated financial statements. During the years ended December 31, 2021, 2020, and 2019, CTBI has not recognized a significant amount of interest expense or penalties in
connection with income taxes.
Earnings Per Share (“EPS”) –
Basic EPS is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding, excluding restricted shares.
Diluted EPS adjusts the number of weighted average shares of common stock outstanding by the dilutive effect of stock options, including
restricted shares, as prescribed in ASC 718, Share-Based Payment.
Segments – Management analyzes the operation of CTBI assuming one operating
segment, community banking services. CTBI, through our operating subsidiaries, offers a wide range of consumer and commercial community banking services. These services include: (i) residential and commercial real estate loans; (ii) checking
accounts; (iii) regular and term savings accounts and savings certificates; (iv) full service securities brokerage services; (v) consumer loans; (vi) debit cards; (vii) annuity and life insurance products; (viii) Individual Retirement Accounts and
Keogh plans; (ix) commercial loans; (x) trust and wealth management services; (xi) commercial demand deposit accounts; and (xii) repurchase agreements.
Bank Owned Life Insurance – CTBI’s bank owned life insurance policies are carried at their cash surrender value. We recognize tax-free income from the periodic increases in cash
surrender value of these policies and from death benefits.
Mortgage Servicing Rights –
Mortgage servicing rights (“MSRs”) are carried at fair market value following the accounting guidance in ASC 860-50, Servicing Assets and Liabilities.
MSRs are valued using Level 3 inputs as defined in ASC 820, Fair Value Measurements. The fair value is determined quarterly based on an
independent third-party valuation using a discounted cash flow analysis and calculated using a computer pricing model. The system used in this evaluation, Compass Point, attempts to quantify loan level idiosyncratic risk by calculating a risk derived
value. As a result, each loan’s unique characteristics determine the valuation assumptions ascribed to that loan. Additionally, the computer valuation is based on key economic assumptions including the prepayment speeds of the underlying loans
generated using the Andrew Davidson Prepayment Model, FHLMC/FNMA guidelines, the weighted-average life of the loan, the discount rate, the weighted-average coupon, and the weighted-average default rate, as applicable. Along with the gains received
from the sale of loans, fees are received for servicing loans. These fees include late fees, which are recorded in interest income, and ancillary fees and monthly servicing fees, which are recorded in noninterest income. Costs of servicing loans are
charged to expense as incurred. Changes in fair market value of the MSRs are reported as an increase or decrease to mortgage banking income.
Share-Based Compensation – CTBI
has a share-based employee compensation plan, which is described more fully in note 14 below. CTBI accounts for this plan under the recognition and measurement principles of ASC 718, Share-Based Payment. Share-based compensation restricted and performance-based stock units/awards are classified as equity awards and accounted for under the treasury stock method. Compensation expense for
non-vested stock units/awards is based on the fair value of the award on the measurement date, which, for CTBI, is the date of the grant and is recognized ratably over the vesting or performance period of the award. The fair value of non-vested stock
units/awards is generally the market price of CTBI’s stock on the date of grant. CTBI accounts for forfeitures on an actual basis.
Comprehensive Income – Comprehensive income consists of net income and other comprehensive
income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation (depreciation) on AFS securities and unrealized appreciation (depreciation) on AFS securities for which a portion of an other than temporary
impairment has been recognized in income.
Transfers between Fair Value Hierarchy Levels – Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs), and Level 3 (significant unobservable inputs) are recognized on the period ending date.
New Accounting Standards –
➢ Simplifying the Accounting for Income Taxes –
In December 2019, the Financial Accounting Standards Board (“FASB”)
issued ASU 2019-12, Income Taxes (Topic 740), Simplifying
the Accounting for Income Taxes.
The amendments in this ASU simplify the accounting for income taxes
by removing the following exceptions:
1. Exception to the incremental
approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income);
2. Exception to the requirement
to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment;
3. Exception to the ability not
to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and
4. Exception to the general
methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.
The amendments in this ASU also
simplify the accounting for income taxes by doing the following:
1. Requiring that an entity
recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax;
2. Requiring that an entity
evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction;
3. Specifying that an entity is
not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal
entity that is both not subject to tax and disregarded by the taxing authority;
4. Requiring that an entity
reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date; and
5. Making minor codification
improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.
For public business entities,
the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. CTBI adopted this ASU effective January 1, 2021 with no significant impact to our consolidated financial
statements.
➢ Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, a consensus of
the FASB Emerging Task Force – In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging
(Topic 815). The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323,
and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or
exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and
increasing comparability of the accounting for these interactions. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. CTBI
adopted this ASU effective January 1, 2021 with no significant impact to our consolidated financial statements.
➢ Facilitation of the Effects of Reference Rate Reform on Financial Reporting – In April 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) —Facilitation of the
Effects of Reference Rate Reform on Financial Reporting. In response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators around
the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The amendments in this ASU provide optional guidance for a
limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria are met. This ASU applies only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The
expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of
January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We anticipate this ASU will simplify any
modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition. At this time, we do not anticipate any material adverse impact to our business operation or
financial results during the period of transition.
➢ Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and
Vintage Disclosures – In February 2022, the FASB voted to issue a final ASU that will drop the TDR designation for entities that have adopted CECL and add vintage disclosures for public business entities. The effective date would be
fiscal periods beginning after December 22, 2022. The changes can be early adopted, separately by topic.
|