A new model for expected credit losses is supposed to fix flaws in the accounting system and protect against future financial crises. But the so-called CECL model comes with its own set of challenges that will dramatically change firms' accounting practices for impaired loans. The Financial Accounting Standard Board's (FASB) recently issued current expected credit loss (CECL) model attempts to align measurement of credit losses for all financial assets held at amortized cost, and specifically calls out potential improvements to the accounting for purchased credit impaired (PCI) assets.
In this article, we demonstrate the effect of the new allowance framework by quantifying allowances and credit earnings volatility for a sample portfolio.
In this article, we explore existing and future accounting and operational challenges faced by institutions acquiring financial assets with credit deterioration.
In this article, we use historical data to calculate and compare loan- and portfolio-level loss allowances under the incurred loss model and CECL.
The new CECL and IFRS 9 accounting standards will require financial institutions to adjust loss allowances based on forward-looking expectations and calculate lifetime losses. In this article, we demonstrate the effect of the new allowance framework by quantifying allowances and credit earnings volatility for a sample portfolio. Our case study finds that along with a shift in the level of allowance, portfolio dynamics and concentrations play an increasingly important role in understanding and communicating expected performance and earnings.
This article provides an overview of the CECL Quantification: Commercial & Industrial Portfolios webinar, discussing the common methodologies for estimating credit losses in C&I lending and how to adapt methodologies to be more forward-looking and compliant with CECL requirements.
This article describes the new standards set forth by the FASB. It covers the history of the ALLL and explains how the recent financial crisis highlighted the need for new standards.
All CECL Capabilities
CECL Data Capabilities
CECL Model Capabilities
CECL Advisory Capabilities
CECL Economic Scenario Capabilities
CECL Process Automation Capabilities