A new model for recognizing credit losses

Description

Abstract: The Financial Accounting Standards Board finalized its new standard for recognizing credit losses on financial instruments. Accounting Standards Update (ASU) No. 2016-13 requires SEC filers to adopt a current expected credit loss (CECL) model, effective for fiscal years beginning after December 15, 2019. This article discusses how CECL is a dramatic departure from the current incurred-loss model and why companies will need to develop new processes, systems and controls to capture necessary data.