After attending the AICPA’s Banking and Saving Institution’s Annual Conference in Washington, D.C. in September 2014, financial institutions have expressed concern over preparation for the FASB’s proposed Current Expected Credit Loss (“CECL”). Significant differences exist between the current historical loss rate method used to calculate the allowance for loan and lease losses (“ALLL”) and the new CECL model proposed by the FASB. Due to the proposed changes, the CECL model will require financial institutions of all sizes to recognize an immediate allowance for credit losses that represents all expected losses. The proposed model would likely increase a bank’s ALLL by 30-50%, as stated by the OCC’s Thomas Curry and includes gathering and computing a significantly higher volume of data. Additionally, it was noted that Institution’s should began preparing for the impact of the issuance of the CECL model, in 2018-2019, by beginning the accumulation of this data now. For additional information or assistance please contact James Dowling (James.Dowling@marcumllp.com) of the Marcum Financial Institutions Services Group.
See the attached article for the FASB’s exposure draft and see the links below to the FASB’s project update and public comments on the exposure draft.