The Current Expected Credit Losses (CECL) standard introduced significant accounting changes to the financial institutions industry—some of the most notable in decades.
CECL modifies how companies evaluate impairment of financial assets and should be applied to nearly any financial asset measured at amortized cost. This includes loans, notes receivables, and even investments in held-to-maturity (HTM) debt securities.
Whether you’re interested in fully implementing CECL or just need select resources to get across the finish line, our professionals will help you identify and implement solutions specific to your company’s needs and scope—at every step of the process.
The new standard is principles based, with broad concepts that require companies understand and tailor the changes based on their specific circumstances. Before getting started, we’ll assess your company’s needs and determine an approach, providing you with insight into the following:
As methods for adopting CECL continue to evolve, our professionals are committed to helping you navigate the implementation process.
Applying CECL is a multistep process—and one that can be difficult to achieve without an experienced team. Our professionals can help you apply the standard from start to finish, taking your current and future needs into account.
Here are a few of the services we provide:
Considering the following questions can help your company determine where in the CECL lifecycle it falls. From there, our professionals can help you hit the ground running.
Guidance: At completion of this stage, the necessary information has been collected to evaluate asset class risk characteristics and available data to evaluate potential segmentation, pooling, and methodology options by asset class.
Guidance: At completion of this stage, management will have selected the appropriate methodologies to determine credit losses by asset class and have selected the appropriate model(s) to calculate the expected losses by asset
Guidance: At completion of this stage, management will have a developed and implemented model(s) to calculate and report on expected credit losses.
Guidance: At completion of this stage, management will have the necessary framework for continued CECL reporting.
We provide these services for financial institutions of all sizes—including smaller, less-complex banks with fewer loan types, large regional banks with multistate operations, credit unions, and other consumer and asset-based lending companies.
One of the most challenging aspects of applying the new standard is forecasting future conditions—and their impacts on lifetime expected losses within the loan portfolio. Staying current with changes to the standard can help you adjust your approach as needed.
To learn more about CECL, its current and forecasted changes, and our unique perspectives, view our CECL Accounting Guide.
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