Wells Fargo, Others Get Favorable Loan Loss Accounting Change

U.S. accounting rulemakers issued a slate of relatively minor changes to its much-watched loan loss accounting rules, including a piece that could make Wells Fargo & Co.’s loss reserves shrink.

A part of the update, published April 25, clarifies that businesses must consider potential recoveries, even on loans previously written off, when making loss calculations under the Financial Accounting Standards Board’s major new current expected credit losses (CECL) accounting rule. The update also clarifies that expected recoveries should not exceed the amounts banks once considered uncollectible.

Wells Fargo CFO John Shrewsberry during an April 12 earnings ...