Accounting for Credit Losses

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 - fiscal years beginning after December 15, 2020,
  • and interim periods within fiscal years beginning after December 15, 2021

Credit Loss Standard Resources

CECL Issues Tracker 
Implementation issues identified by the Expert Panels. 

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

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

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

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.

Do You Have a Question About Credit Losses?

If you have a question regarding credit losses, please complete the form below and to send your inquiry to the professional staff of the AICPA.

AICPA Credit Losses Standard Insights

Credit loss standard implementation tips, Journal of Accountancy, March 17, 2017

New credit loss standard manageable for US banks, Fitch saysJournal of Accountancy, July 25, 2016

5 tips for implementing FASB's credit loss standardJournal of Accountancy, July 12, 2016

New FASB standard requires earlier reporting of credit losses
Journal of Accountancy, June 16, 2016 

How expected credit loss standards will challenge auditorsJournal of Accountancy, March 3, 2016

AICPA Webcasts and CPE Courses

CPE

Financial Instruments: Mastering the New FASB Requirements

IFRS Financial Instruments (part of the IFRS Certificate Program)

Recognition, Measurement and Reporting of Financial Instruments Using IFRS

Publications

Special Considerations in Auditing Financial Instruments- Audit Guide

Valuation of Financial Instruments: Assessing Risk and Developing an Audit Approach

Understanding Financial Instruments: Purpose, Risks and Valuation Considerations