Current Expected Credit Losses (CECL)

Questions and Answers on FASB’s Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments
  • How will the allowance for credit losses change?

  • What is the measurement requirement for projecting future losses?

  • What information must be considered when providing for the future loss estimate?

  • How long into the future must the bank look to estimate future credit losses?

  • Does the bank need to consider prepayment estimates when projecting lifetime credit losses?

  • Does the bank need to consider the possibility of future loan extensions when projecting lifetime credit losses?

  • Does CECL apply to investment securities?

  • What is the effective date of the ASU?

  • Can I adopt CECL early?

  • I am hearing that I may need to purchase third party software and CECL solutions to be able to make the impairment calculations.  Do I need to be prepared to purchase expensive software and consulting?