Credit Loss Standard (CECL) Issues

Identified Credit Loss Implementation Issues

Credit loss implementation issues identified by the Depository Institutions and Insurance Expert Panel members, when available, will be posted here. Full credit loss implementation issues will be posted below for informal comments after review by the AICPA Financial Reporting Executive Committee (FinREC).

Staff Contact: Jason T. Brodmerkel, Jason.Brodmerkel@aicpa-cima.com

Feedback Requested: Respondents should submit any comments including the implementation issue number to Jason.Brodmerkel@aicpa-cima.com by the dates noted below:

Ref. Description of Implementation Issue Status
1 Issue #1: Zero Expected Credit Losses- This issue paper focuses on specific examples that might qualify as instruments that may be considered to have zero expected credit losses.  These examples are limited to: US Treasury Securities, Ginnie Mae Mortgage-Backed Securities, and Agency Mortgage-Backed Securities.  Comment Period ended October 10, 2018. Final version available on the Online Publication Library. 
2 Issue #2: Determining the "Estimated Life" of a Credit Card Receivable. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 5 hyperlinked here). Issues included: appropriate application of the CARD act,  expected payments to a revolving credit card receivable, estimation of the amount and timing of payments expected to be collected, to name a few.   Resolved during the FASB October 12, 2017 FASB Board Meeting. 
3 Issue #3: Discounting Expected Cash Flows Using an Entity's Effective Interest Rate: This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 1 hyperlinked here).  Issues included: consideration of prepayments when discounting expected cash flows, appropriate use of  EIR, and appropriate use of an adjusted EIR, to name a few.  Resolved during FASB December 13, 2017 meeting.
4 Issue #4: Transfer of Loans from Held for Sale to Loans Held for Investment and Transfer of Credit Impaired Debt Securities from Available-for-Sale (AFS) to Held-to-Maturity (HTM). This topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 10 hyperlinked here). Issues included: transferring debt securities with recorded credit losses from AFS to HTM, transferring an HFS loan to an HFI loan, and presentation and disclosures of transfers between categories, to name a few.  Resolved during the FASB August 29, 2018 FASB Board Meeting. Codification changes being made by FASB.
5 Issue #5: Scope of Purchased Financial Assets with Credit Deterioration Guidance for Beneficial Interests within Subtopic 325-40. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 2 hyperlinked here). Issues included: Scoping and determination of contractual cash flows when assessing beneficial interests.  Resolved during the June 12, 2017 FASB TRG Meeting. 
6 Issue #6: Reasonable & Supportable Forecasting. This topic includes the appropriate considerations when: developing a reasonable and supportable forecast period, use of historical loss information within the reasonable and supportable forecast period, and transition from reasonable and supportable forecast period to reversion, to name a few.  Comment Period ended December 31, 2018. Final version available on the Online Publication Library in February 2019. 
7 Issue #7:  - Accounting for Troubled Debt Restructurings. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 4 hyperlinked here).  This topic includes consideration of information that is relevant to assessing the troubled debt restructuring including reasonably expected TDRs. Resolved during the September 2017 FASB Meeting Minutes. 
8 Issue #8: Transition Guidance for Pools of Financial Assets Accounted for under Subtopic 310-30. This topic was addressed at the June 12, 2017 FASB TRG Meeting (Memo 3 hyperlinked here). This topic includes: the appropriate application of maintaining pools accounted for under Subtopic 310-30 at adoption as well as ongoing basis.  Resolved during the June 12, 2017 FASB TRG Meeting. Minute Minutes hyperlinked here. 
9 Issue #9: Auditing Accounting Estimates, including Fair Value Accounting Estimates and Related Disclosures. This was a IAASB document developed in consideration of auditing IFRS 9. The Credit Losses Task Force has utilized this document in discussions and considerations when it discusses auditing the new Credit Losses Standard. Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
10 Issue #10: Auditing the new Credit Loss Standard. This topic includes auditing considerations when auditing the new standard. Issue papers have been previously developed by the Credit Loss Task Force level only.  These papers have been compiled and a forthcoming Practice Aid will be made available in a draft format.  Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
11 Issue #11: Simplifying Assumptions from Preparers. This was a paper provided by the American Bankers Association that considered multiple simplifying assumptions for preparers when implementing the new standard. The Task Force discussed this topic internally only. No final consensus was determined on this topic at this time.  Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
12 Issue #12: Collateral Maintenance Provisions: This is an issue paper developed by the Task Force. The paper includes issues over the appropriate application of a practical expedient such as: considerations regarding replenishment of collateral, scoping of agreements including securitized borrowings, consideration of fair value of the collateral.  Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
13 Issue #13: Consideration of Accrued Interest- this topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 9 hyperlinked here). Issues included: the inclusion of accrued interest in the definition of amortized cost basis and reversal of accrued interest on nonaccrual loans, to name a few.  Resolved during the FASB August 29, 2018 FASB Board Meeting. Codification changes being made by FASB.
14 Issue #14: Recoveries- This topic was addressed at the June 11, 2018 FASB TRG Meeting (Memo 11 hyperlinked here). Issues included: the consideration of expected recoveries in both individual and pooled assets, the application of expected recoveries within either the calculation or directly at the asset level, appropriateness of recoveries that may exceed the amortized cost basis,  to name a few.  Resolved during the FASB November 7, 2018 FASB Board Meeting.  Codification changes being made by FASB.
15 Issue #15: Discount Rates for Variable Rate Loans. Issues included: appropriate projections of changes in the independent factor or factors that determine the contractual interest rate on a variable rate financial asset for the purposes of determining the EIR and estimating expected future cash flows.  Resolved during FASB December 13, 2017 meeting. Codification changes being made by FASB.
16 Issue #16: Accounting for Recoveries on Credit Insurance Contracts- Issues include: the appropriate recognition threshold and measurement model that should be used for a freestanding credit insurance contracts (not accounted for as a derivative under Topic 815).  Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
17 Issue #17: Application of Subsequent Events - Issues include: When and how should subsequent events be reflected when applying FASB ASC 326. See SEC staff speech from the AICPA Banking Conference for further details. FASB and SEC Staff addressed this issue as a Technical Inquiry. Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
18 Issue #18: Review of ABA Discussion Paper: “Analyzing Current Loan Performance Under CECL. ”  Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
19 Issue #19: Review of ABA Discussion Paper, “CECL Effective Date for Private Banks.” Credit Losses Task Force Discussion Only. Responses will be considered through our forthcoming Practice Aid and Accounting and Auditing Guide available in the future. 
20 Issue #20: Contractual Term: Extensions: Considering the Life: Issues include questions of whether entity may consider certain extension options when determining the contractual term of a financial asset in the scope of Subtopic 326-20. See memo 15 hyperlinked here for further details. Resolved during FASB November 7, 2018 board meeting. Codification changes being made by FASB.
21 Issue #21: Inclusion of Future Advances of Taxes and Insurance Payments in Estimates: Issues include: if a lenders’ expectations of future losses on payments of tax, insurance premiums, and other “costs” (i.e., payments made by lenders that may not be recovered from borrowers) should be included in the estimate of expected lifetime credit losses prior to the lender advancing the funds or incurring the costs.  Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process.
22 Issue #22: Reversion Method: Estimation vs Accounting Policy: Issues include: when determining whether a reversion technique used, if any, in estimating expected credit losses is an accounting estimation technique or  accounting policy election.  Comment Period ended October 10, 2018. Final version available on the Online Publication Library. 
23 Issue #23: Zero Expected Credit Loss Factors for Secured Financial Assets Secured by Collateral. Issues include: What circumstances and factors would it be appropriate to have no allowance for credit losses on secured financial assets.  Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
24 Issue #24: Refinancing and Prepayments. Issues include: whether entities are required to use the loan refinancing or restructuring guidance in paragraphs 310-20-35-9 through 35-12 to determine what constitutes a prepayment for the purposes of the expected credit losses measurement. Memo #12 covers the discussion hyperlinked here. Resolved during the FASB August 29, 2018 FASB Board Meeting. 
25 Issue #25: Implementation Dates For Non-PBEs. Questions have arisen regarding the implementation date timing for non-public business entities. Resolved during the FASB July 25, 2018 FASB Board Meeting. 
26 Issue #26: Capitalized Interest. Issues include: Considerations over capitalized interest when estimating the expected credit loss using a method other than a discounted cash flow method. Memo 8 covers the discussion hyperlinked here.  Resolved during the FASB August 29, 2018 FASB Board Meeting. 
27 Issue #27: Fair Value Option: Questions surrounding the one-time election to apply the FVO upon adoption of the standard. This discussion was considered within the scope of Memo 17 regarding recoveries hyperlinked here.
Resolved during FASB November 7, 2018 board meeting. Forthcoming codification changes will be made in the future. Codification changes being made by FASB.
28 Issue #28: Scope Exception for Loans and Receivables between Entities under Common Control. Issues include: does the scope exception for loans and receivables between entities under common control apply to US GAAP reporting at the subsidiary standalone level? See memo 7 hyperlinked here for further details. FASB Staff addressed this issue as a Technical Inquiry. Issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
29 Issue #29: Gains and Losses on Subsequent Disposition of Leased Assets: Issue included a technical inquiry question over how should expected gains and losses on the subsequent disposition of leased assets be treated when measuring expected losses.  See memo 7 hyperlinked here for further details. FASB Staff addressed this issue as a Technical Inquiry. An issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
30 Issue #30: Billed Operating Lease Receivables- Issues include a question regarding the application of billed operating lease receivables within FASB ASC 326. See memo 7 hyperlinked here for further details. FASB Staff addressed this issue as a Technical Inquiry. An issue Paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
31 Issue #31: Shorter Term Loans: Developing a Model for a 1-year loan that has a 3-Year Project Term: Issues include: whether an entity is precluded from considering future economic and other conditions  beyond the contractual term of a financial asset. See memo 15 hyperlinked here for further details. Resolved during FASB November 7, 2018 board meeting. Forthcoming codification changes will be made in the future. Codification changes being made by FASB.
32 Issue #32: Partial Discounting: Issues included whether discounting certain inputs when using a method other than a DCF method in determining expected credit losses is acceptable. Overall November 2018 agenda discusses this issue hyperlinked here.  FASB Staff addressed this issue as a Technical Inquiry. An issue paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
33 Issue #33: Accounting for Changes in FX Within Available for Sale Securities. Issue included: accounting for unrealized losses resulting from changes in foreign exchange rates for foreign-currency-denominated AFS debt securities. Overall November 2018 agenda discusses this issue hyperlinked here.  FASB Staff addressed this issue as a Technical Inquiry. An issue paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
34 Issue #34: Zero Expected Credit Losses for Unsecuritized assets (including reinsurance receivables).  This issue paper focuses on a limited set of products and examples and their potential indicators for zero loss surrounding unsecuritized assets. Issue Paper is being developed. This paper will be available to the public in the future during the comment period process. 
35 Issue #35: Application of 325-40 for Trading Securities. Should an entity maintain an allowance for credit losses for a beneficial interest within the scope of Subtopic 325-40 that is classified as trading? Overall November 2018 agenda discusses this issue hyperlinked here. FASB Staff addressed this issue as a Technical Inquiry. An issue paper has been developed and is being internally reviewed. This paper will be available to the public in the future during the comment period process. 
36 Issue #36: Vintage Disclosures: Issues include whether entities should be required to make disclosures with respect to the presentation of revolving loans that have converted to term (and other potential required disclosures). Memo #16 linked here discusses this issue further. Resolved during FASB November 7, 2018 board meeting. Forthcoming codification changes will be made in the future.
37 Issue #37: Subsequent Events Factors: Issues include: A discussion regarding factors that might signify subsequent and how to appropriately apply them under FASB ASC 326.  Issue Paper is being developed. This paper will be available to the public in the future during the comment period process. 
38 Issue #38: Recognition of Subsequent Increases in Fair Value of Collateral for Collateral Dependent Loans. Issues include: an entity's recognition of  subsequent increases in fair value for a collateral dependent loan prior to the sale or final disposition of the collateral. This was discussed in Memo 17 hyperlinked here.  Resolved during FASB November 7, 2018 board meeting. Forthcoming codification changes will be made in the future.


The Depository and Lending Institutions Expert Panel recommends the following AICPA products for current credit loss issues:

AICPA Audit and Accounting Guide Depository and Lending Institutions