Current Expected Credit Loss (“CECL”) Implementation Services
SEC Accounting and Advisory Services
December 06, 2018
FASB’s new accounting rule for measuring credit losses, the Current Expected Credit Loss, or “CECL” model presents a significant challenge to banks, finance companies and other entities with significant credit exposures. This new accounting standard fundamentally changes how reporting entities estimate credit losses, requiring a transition from the long-standing “incurred loss” model to an approach that requires institutions to estimate the amount of credit losses expected over the life of the receivable.
CECL requires reporting entities to consider historical experience and current information, consistent with the incurred loss model, but also requires reporting entities to incorporate economic forecasts to estimate expected credit losses. Reporting entities, particularly those with significant credit exposure, may need to modify information systems to capture additional historical loan performance data and design and implement new policies, processes, controls and reporting systems. Given the amount of preparation required, reporting entities, and financial institutions, in particular, should be diligently preparing for the new rule, as the window to prepare for implementation is narrow. Specifically, implementation is required for fiscal years beginning after December 15, 2019 for SEC filers, while other entities will be required to adopt CECL in 2021.
Who We Are
FTI Consulting is a leading independent consulting firm and a preferred provider of credit risk management and accounting services to financial institutions and other public and private companies. We bring a diverse team of experts with the necessary skills and experience to help institutions implement CECL in an effective and regulatory compliant manner. Our SEC Accounting and Advisory practice is comprised of senior professionals with extensive GAAP and SEC reporting experience, including former Big Four audit partners and senior managers, as well as SEC staff. Our “National Office” experts include a former FASB Board member, a former accounting firm National Office partner and a senior manager from the Chief Accountant’s Office of a Federal bank regulator. Similarly, our Financial Institution Governance and Regulation team helps financial institutions manage credit risk and implement policies/procedures that are consistent with industry best practices and regulatory expectations. These experts are routinely engaged to assist financial institutions promote effective governance, remediate identified weaknesses, and resolve regulatory inquiries and enforcement actions.