Credit Losses: Return of Management’s Judgment

Accounting for Credit Losses

CECL Audit Practice Aid

CECL Issues Tracker

Credit Losses Implementation issues identified by the Expert Panels.

Credit Losses Task Force

Credit Losses Task Force Auditing Subgroup Vendor Meetings for April and June 2019 - Key Takeaways

The current expected credit loss standard is almost here. If you or your clients work at a depository institution, the time to dive into this standard is now. This webpage is your one stop shop for timely information on the new standard. Check back often as we will be updating the page regularly. Here’s what you need to know. The new standard:

Eliminates this threshold and allows for more forward-looking information to be considered when developing a best estimate.
Allows for an increase in management’s professional judgement when considering a wide-variety of factors.
Applies to financial assets at amortized cost, including loans, reinsurance and trade receivables, held-to-maturity (HTM) debt securities, impairment model for available-for-sale debt securities, net investment in leases, and certain off-balance sheet credit exposures, such as loan commitments.

Effective dates:

Early adoption permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within
Public Business Entities (PBEs) that are SEC Filers - fiscal years beginning after December 15, 2019, including interim periods within
Other PBEs - fiscal years beginning after December 15, 2020, including interim periods within
Non-PBEs - for fiscal years beginning after December 15, 2021, including interim periods within those years.

Note: At its July 17, 2019, Board meeting, FASB vote to adopt a two-bucket approach designed to stagger effective dates for major standards. Bucket one includes SEC filers (as defined in GAAP), excluding smaller reporting companies (SRCs) as currently defined by the SEC. Bucket two makes up all other entities, including the following:

All other PBEs, including SRCs
Private companies
All not-for-profit organizations, including not-forprofit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the counter market
All employee benefit plans, including employee benefit plans that file financial statements with the SEC FASB decided that FASB ASU No. 2016-13 will be effective for PBEs that are SEC filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations. For all other entities, FASB decided that FASB ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., effective January 1, 2019, for calendar-year-end companies). The FASB Board’s tentative decisions can be found under the “Meetings” tab at fasb.org. FASB notes that all reported conclusions are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot is voted on to issue an ASU or a Statement of Financial Accounting Concept.

Credit Loss Standard Resources

2018 CECL Interpretive Issues
CECL slides on Intepretative issues of the standard from the AICPA National Depository Institutions Conference.

Template Slides: Introduction to the Board of Director
Slides developed by the ABA to help present the new standard to your Board of Directors (and/or Management).

2017 CECL Credit Union Implementation
CECL Slides on implementation of the standard from the AICPA National Credit Union Conference.

2017 CECL Interpretative Issues
CECL slides on Intepretative issues of the standard from the AICPA National Depository Institutions Conference.

FASB Resources

Credit Loss Standard

Credit Loss Educational Resources

IASB Financial Instruments Standard

In July 2014, the International Accounting Standards Board (IASB) published the final version of IFRS 9 Financial Instruments. This began as a joint project with the FASB, however, as it relates to accounting for impairment, the two Boards did not reach convergence.

IFRS 9 requires an impairment allowance against the amortized cost of financial assets held at amortized cost or FVOCI. The change in this allowance is reported in earnings. For most assets, under IFRS 9, impairment is measured as the present value of credit losses from default events projected over the next 12 months. In contrast, the new CECL model measures impairment over the expected life of the asset.