Could CECL changes be coming?
The spotlight is shining brightly this month on potential changes to the current expected credit loss (CECL) model, even though the implementation deadline clock is ticking.
FASB seeks comments on proposed CECL updates on accrued interest, recoveries, prepayments
Financial institutions and other parties interested in the current expected credit loss model, or CECL, have until Dec. 19 to comment on FASB's proposals to update its guidance for accounting for credit losses.
FASB meeting: New disclosure requirements related to gross write-offs and recoveries
The Financial Accounting Standards Board (FASB) met today to discuss the current expected credit loss (CECL) accounting standard and expand on implementation issues brought up in the transition resource group meeting in June. The purpose of the transition resource group is to discuss stakeholders’ issues about CECL, to inform the board of the issues, and to provide a forum for stakeholders to learn about implementation experiences of others.
FASB issues draft language on CECL extension
The Financial Accounting Standards Board released the draft of its proposed Accounting Standards Update to clarify the transition for non-public business entities (non PBEs) under the current expected credit loss model, or CECL.
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,”
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.
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 Abrigo addressed some of the questions during the webinar and archived the responses below for the ALLL.com audience.
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.
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.
As a result of ASU 2010-20, all banks that have audited financial statements must provide disclosure reports to their examiners. The main objective of disclosure reporting is increased transparency to financial statement users about institutions’ allowance for credit losses and the credit quality of their financing receivables.
Life of Loan Concept
The more forward-looking CECL model will require institutions to adopt a methodology that takes into account the lifetime of the loan. This will require institutions to gather significantly more data components in order to perform the calculation.