GAAP—Update on new Accounting Principles and How They Impact Your Borrowers’ Financials

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. 

• Close, but no cigar
• Differences still exist

• Seller recognizes revenue when the buyer gets possession of a good or service
• Generally sooner than later
• More emphasis on gross revenues 

• Troublesome off-balance-sheet loophole finally plugged
• Whether operating or financing lease, both are capitalized
• Both lease liability and right of use (ROU) assets put on the balance sheet
• Higher leverage ratios, lower return on asset ratios
• Cash flow impacts

• Incurred loss replaced by loss over the life of the loan
• Higher probability of default
• CECL means higher provision for credit losses in the financials of borrowers, not just bankers

• Balance sheet simplified
• More disclosure of liquidity

• Commercial bankers
• Commercial real estate lenders
• Credit analysts
• Credit department staff
• Loan underwriters
• Loan review officers
• Credit department managers
• Senior lenders
• Chief credit officers

A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek principal of Devon Risk Advisory Group based near Atlanta, Georgia.  Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc.  Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC).  PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are more appropriate for privately held firms.  He also serves as the PCC’s representative to FASB’s Credit Losses Transition Resource Group supporting the new current expected credit loss (CECL) standard to be implemented in fiscal year 2019 for public companies and 2020 for private firms.

The 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, he was chief credit officer for Barnett Bank’s Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, his experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor.

A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, Dev earned his M.B.A. from the University of Hawaii. Mr. Strischek serves as an instructor in several banking schools, including the Stonier Graduate School of Banking, and the Southwest Graduate School of Banking. 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.

Mr. Strischek has written some 200 articles on credit risk management, financial analysis and related subjects, and he is the author of Analyzing Construction Contractors and instructor of  a contractor analysis workshop. A past national chair of RMA and former RMA Florida Chapter president, Dev has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department’s Financial Service Volunteer Corps (FSVC).