Annual report pursuant to Section 13 and 15(d)

ACCOUNTING STANDARDS UPDATE

v3.20.4
ACCOUNTING STANDARDS UPDATE
 12 Months Ended
Dec. 31, 2020
Accounting Standards Update and Change in Accounting Principle [Abstract]  
ACCOUNTING STANDARDS UPDATE ACCOUNTING STANDARDS UPDATE
Accounting standards adopted in current period
Standard Summary of guidance Effects on financial statements
ASU 2016-13 - Financial Instruments - Credit Losses.
Issued June 2016
•Eliminates the probable recognition threshold for credit losses on financial assets measured at amortized cost, replacing the current incurred loss framework with an expected credit loss model.
•Requires those financial assets subject to the new guidance to be presented at the net amount expected to be collected (i.e., net of expected credit losses).
•Measurement of expected credit losses should be based on relevant information including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
•The guidance will require additional quantitative and qualitative disclosures related to the credit risk inherent in Huntington’s portfolio and how management monitors the portfolio’s credit quality.
•Management adopted the guidance on January 1, 2020 through a cumulative-effect adjustment to retained earnings and implemented changes to relevant systems, processes, and controls where necessary.
•The adoption of ASU 2016-13 on January 1, 2020 resulted in an increase to our total ACL of $393 million. This represented an increase of 44% from the 2019 year end ACL level of $887 million. For more detail on the day 1 adoption impacts, please refer to Note 6 - Allowance for Credit Losses.
•The ASU eliminated the current accounting model for purchased-credit-impaired loans, but requires an allowance to be recognized for purchased-credit-deteriorated (PCD) assets (those that have experienced more-than-insignificant deterioration in credit quality since origination). Huntington did not have any loans accounted for as PCD upon adoption.
•At adoption, Huntington did not record an allowance with respect to HTM securities as the portfolio consists almost entirely of agency-backed securities that inherently have minimal nonpayment risk.
ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
Issued: December 2019
•The ASU simplifies the accounting for income taxes by removing exceptions 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;
◦Requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment;
◦Ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and,
◦General methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.
•The ASU also simplifies various other aspects of the accounting for income taxes.
•Management early adopted the guidance on October 1, 2020.

•The ASU did not have a material impact on Huntington’s Consolidated Financial Statements.
Standard Summary of guidance Effects on financial statements
ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
Issued: March 2020; Amended: January 2021
•The ASU provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met, including the following:
◦Modifications of contracts within the scope of Topics 310, Receivables, and 470, Debt, should be accounted for by prospectively adjusting the effective interest rate;
◦Modifications of contracts within the scope of Topic 842, Leases, should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification or discount rate;
◦The ASU also provides optional expedients for various hedging relationships, allowing hedge accounting to continue uninterrupted, provided certain criteria are met; and,
◦An entity may make a one time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity if certain criteria are met.
•Topic 848 was subsequently amended in January 2021, allowing entities to elect certain optional expedients and exceptions in Topic 848 relating to derivative contracts and hedge accounting affected by the discounting transition initiated by certain central clearing parties.

•Management early adopted the guidance on October 1, 2020.
•While neither the ASU or the amendment had a material impact on Huntington’s Consolidated Financial Statements, they do ease the administrative burden of accounting for contracts impacted by reference rate reform.