Alll Insider Articles
ALLL Insiders are bankers, consultants, credit union professionals, accountants and others who have extensive knowledge in the ALLL calculation. The below articles comprise these experts' recommendations and opinions on various components of the allowance calculation.
- Jul 18, 2017
Data: A Hurdle For CECL
Due to the shift from an incurred to current expected credit loss model (CECL), Sageworks clients have been advised to start working on loan-level data collection now as a first step toward being compliant under future GAAP. However, many banks are unsure of what data they have, which fields they need to start tracking and how to store the amount of data necessary for CECL.
- Apr 1, 2017
The Case for Early Adoption of the FASB’s Current Expected Credit Loss (CECL) Model
The standard, issued in ASU 326 (Financial Instruments – Credit Losses) in June of 2016, contains several timelines for required adoption of the standard depending on the type and existing reporting requirements of the financial institution. While the timelines are (directly) independent of institutional size and complexity, all financial institutions do have one thing in common: For fiscal periods beginning after December 15, 2018, and for interim periods within those years, use of the CECL standard is permitted.
- Jan 19, 2017
Other Regulatory Considerations for CECL Preparation
On December 19, 2016, the Board of Governors of the Federal Reserve System (the Fed), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corp. (FDIC), and National Credit Union Administration (NCUA) issued an 18-page, 23-question statement titled, “Frequently Asked Questions (FAQs) on the New Accounting Standard on Financial Instruments – Credit Losses,”
- Sep 22, 2016
CECL is here – Answering your common questions
For financial services companies, June 2016 was a major milestone with the FASB’s issuance of the new accounting standard for loan losses and held-to-maturity debt securities. Designated the current expected credit loss model (CECL), the standard requires entities to record credit losses at origination based on a life of loan loss concept. This is an extensive, impactful change in accounting guidance, which brings significant questions regarding interpretations, implementation and challenges financial services professionals and others are facing.
- Aug 12, 2016
Making sense of CECL
In a July 2016 webinar with more than 220 bankers attending, executives at banks and credit unions spoke up with some of their most pressing questions related to the implementation of the current expected credit loss (CECL) model. Neekis Hammond CPA and senior risk management consultant at Sageworks addressed some of the questions during the webinar and archived the responses below for the ALLL.com audience.
- Jun 1, 2016
Don’t panic about upcoming accounting change
Bankers shouldn't panic about the upcoming CECL standard. What financial institutions can do now is take measured steps to examine their current calculation processes and to communicate with their boards so that institutional panic doesn’t snowball.
- Dec 1, 2015
Improving your ALLL methodology
Bolstering risk management practices is a top concern for many bankers, and strengthening their ALLL methodology plays a big part in that effort. Probability of default/loss given default (PD/LGD) is widely recognized as a robust type of analysis for determining portfolio loss estimates.
- Aug 20, 2015
FASB’s CECL Model: Navigating the changes
Final deliberations by the FASB on the impairment of financial instruments are drawing to a close, and the board is expected to issue a final standard in 2015. Prior to deciding to issue a final standard, the board will ask themselves whether re-exposure is warranted. While the deliberations are not yet complete, the CECL model removes the “probable” threshold that exists today and requires the development of an estimate of all contractual cash flows not expected to be collected. Given the pervasive impact, many financial institutions are beginning to think about the impact the new model is likely to have on their allowance methodologies.
- Jul 28, 2015
Financial instruments: Credit impairment
Since the financial crisis, the FASB has been debating wholesale changes to the U.S. GAAP credit impairment model. The FASB completed the majority of its deliberations in April and expects to issue a final standard in the fourth quarter of 2015. This standard, which uses the CECL model, fundamentally will change the way the allowance for credit losses is calculated. The standard will have a pervasive impact on all financial institutions, and questions are circulating about what changes are in store.
- Apr 8, 2015
Can You See Where Your Portfolio is Going?
Institutions range in sophistication with respect to assessing their portfolios; however, there are several fundamental principles that every institution, regardless of size, should deploy to soundly manage risk. This consists of a well thought out data gathering plan, a consistent, objective risk rating system, analytical tools to interpret data, and an action-oriented portfolio review. If you "commit to using data to make better decisions, rather than to rationalize guesses...you will find yourself better prepared to cope with the ugly surprises that come to all of us in this business."