In our September 2016 e-Newsletter, we provided an overview of the new Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments. This standard will be effective in 2020 or 2021, depending on whether an institution meets the definition of a public business entity. Please refer to the article, Measuring Credit Impairment of Financial Instruments
, for an overview of ASU No. 2016-13.
The Financial Accounting Standards Board (FASB) and regulators have emphasized that the standard is scalable for different institutions and that various methods are permitted to estimate life-of-loan losses. In other words, not every institution will implement the same methodology to estimate loan losses. This will allow institutions to implement a Current Expected Credit Loss (CECL) methodology that is appropriate for the size and complexity of their specific institution and loan portfolio.
Length: 2 pages (PDF 53 kB)