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Credit losses: May the force be with your mission to CECL

Second in a series on the Financial Accounting Standards Board’s (FASB’s) Current Expected Credit Loss standard

YodaAfter years of debate over the role fair value accounting may have played during the subprime mortgage crisis, accountants seek to apply FASB’s current expected credit loss (CECL) standard as a “force for good” in their depository institutions.

If this is your mission for a bank, thrift or credit union, you probably feel like Luke Skywalker. Ultimately you want to be Yoda — thoughtfully presenting the keys to unlocking a force for good that can strengthen your institution against the dark side of internal disarray and competitive challenges.

As with any mission, success starts with understanding your situation and the power of resources at your fingertips. If you’re still struggling to read and digest the standard, “Do. Or do not. There is no try.”

Dive into data

It’s extremely important to understand what type of data you have right now and what you don’t have just yet. Data analysis will distinctly make or break your level of success. I can’t stress this enough: The more data you’ve collected or can gather now, the better. Strong data will provide more flexibility and reliability upon implementation in the future. Work closely with your core system provider to retrospectively and prospectively collect as much information as possible. In short, if you haven’t started — start now.

Assemble a Jedi council

In setting your organization on the right path, it’s important to have a CECL Steering Committee. Be sure to include all appropriate decision makers. As a best practice, your committee should consist of members from across the organization — think financial reporting, risk management, tax, internal audit.

Overhauling the incurred-loss model can be a daunting task. Once your committee is established, your next step is to come up with detailed goals and plans to appropriately execute your mission. I urge you and the committee to chart a detailed course to success.   

Chart your course

Start by determining your public business entity status. This will directly affect your launch date. If you’re one of the lucky ones who has three or even four years to implement CECL, don’t put off the planning process — the stakes are too high. As with the rest of your mission plan, it never hurts to double check your assumptions with an Obi-Wan Kenobi, who could be your auditor or an outside expert.

Assess your troops

Be realistic about the resources you have available internally and what you might need. For example, if your staff are already at risk of a processor overload, be aware of that limitation and reflect it realistically in your plan by considering additional training, hiring or both. Remember a realistic and well-thought-out plan will ensure that the force remains with you.

Consider outside help

Peer institutions, trade associations, outside service providers, even bounty hunters — numerous resources are at your disposal. IFRS 9, the international credit loss standard, went into effect Jan. 1, 2018. Although IFRS 9 varies from the FASB standard in notable ways, there are many similarities. Those who have implemented IFRS 9 may be especially helpful to you. If you plan to use an outside service provider, be sure to include them as early as possible in your overall plan and timeline.

Don’t forget…

As you create your ultimate plan, it’s important to include specific key dates for each item along the way. Some key items to consider when creating your mission timeline:

  • Complete a data gap analysis and overall examination
  • Create external meeting dates to ensure communication with regulators, auditors and investors
  • Schedule CECL Steering Committee dates throughout the process timeline
  • Determine the role (if any) of outside service providers


Before, during and after the mission, ensure you are communicating and setting expectations internally and externally with board members, management, regulators and your external auditors. The more you communicate, the better folks will understand expectations and the better off you’ll be.

Once you’ve established your mission timeline, it’s time to review key management data and consider your options.

The next step is to educate your leaders (board and management) about upcoming plans. The new credit losses page on aicpa.org features helpful resources including a PowerPoint template that you can share with your board and/or management.

Stay tuned for our next article in this series: Credit losses: Return of management’s judgment. Until then, “May the force be with you.” 

Jason Brodmerkel, CPA, Senior Technical Manager - Accounting Standards, Association of International Certified Professional Accountants

Yoda courtesy of Yuri Turkov/Shutterstock.


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