Countdown to CECL
Kansas City, MO
April 26, 2018
The countdown to implementation of the Financial Accounting Standards Board’s (FASB) Current Expected Credit Loss (CECL) accounting standard has begun, with the new standard going into effect in 2020 for Securities Exchange Commission registrants and 2021 for all other banks. This new standard is likely to be a game changer.
The CECL model will require financial institutions to determine their allowance for credit losses in a different way. Historically, the allowance for credit losses was calculated using an incurred loss approach, which considers historical information for calculating loss rate and then adjusts for current conditions using qualitative and environmental factors. In many cases banks are being asked to go beyond a traditional spreadsheet approach to incorporate risk pools and economic projections that affect the final analysis. That is all about to change.
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