Financial Institutions Face New Credit Loss Standard
On June 16, 2016, the Financial Accounting Standards Board approved the long-awaited Current Expected Credit Losses (CECL) standard. Officially, the standard is ASC Topic 326 Financial Instruments-Credit Losses, but it is commonly referred to as CECL.
Get more information to help your institution implement the new rules. Learn more
CECL represents a major change in the way financial institutions recognize credit losses. The largest impact will be on a financial institution’s Allowance for Loan and Lease Losses (ALLL) calculation, but it also applies to credit losses on held-to-maturity debt securities and loan commitments.
The new standard has the following effective dates
|SEC filers||10-Q and Call Report||March 2020|
|Non-SEC public business entities||Call Report||March 2021|
|All other entities||Financial statements and Call Report||December 2021|
Although most entities have more than four years before this new standard is effective, CECL requires an extensive analysis of your loan loss history, making a long implementation period necessary. Institutions should start reviewing the new standard now and plan for this major change.
How we can help
CLA has developed a multi-phase implementation plan for financial companies and institutions. We anticipate providing continuous insights on the CECL standard as it progresses.