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CECL 2019: Finish strong, with confidence

Ten ways to gain clarity—and confidence—about CECL readiness

Is your company on a straight line to go live with the new current expected credit loss (CECL) standard when it takes effect January 1, 2020? What measures are being taken to increase the certainty of that?

Review steps for assessing CECL readiness

As companies evaluate their CECL readiness and complete the implementation, the calendar can be their most precious asset. As a result, the importance of conducting “parallel run” testing that is sufficient, effective, and informative cannot be overstated. Also imperative is an investor communication strategy that provides adequate transparency and enhances comparability between companies. Both require ample time to prepare—time that many companies are shrinking to save on costs.

To understand the scope of your CECL efforts in 2019, many companies can benefit from conducting a CECL readiness assessment now. It can serve to sharpen your organization’s focus and help identify potential gaps that may lead to costly and disruptive last-minute issues. It can also increase confidence that your CECL implementation program can deliver a timely, end-to-end CECL-compliant process.

Based on Deloitte’s end-to-end CECL implementation model and lessons learned in two years of client engagements, the following are actionable review steps companies can consider as they assess their CECL program and start the final sprint toward CECL adoption.

Top CECL considerations for corporate executives

Final thoughts

Clarity, focus, and confidence are crucial as CFOs and other senior executives educate the board of directors, engage in leadership conversations, and communicate with investors about the final stage of CECL implementation. As you look toward 2019, these final considerations can help you enhance your company’s CECL implementation efforts:

  • Confirm that strong program management capabilities, transparency into the status of your company’s implementation plans, and adequate contingencies exist to deal with inevitable CECL uncertainties.
  • Define a detailed parallel run plan that can demonstrate that everything and everyone involved in implementation are working together efficiently, offer insights into the CECL calculations, and build the necessary skills to carry on with the CECL program after the go-live date.
  • Develop a robust communication strategy that can provide useful preadoption information, help investors understand your company’s CECL methodology and results, and prepare investors to better understand the company’s allowance.

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The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

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