US Current Expected Credit Losses (CECL) implementation insights
Focus on the destination
For the banking industry, the FASB’s new current expected credit losses (CECL) accounting standard is the most impactful accounting change in over a decade. We can help you prepare.
- A collection of insights
- Lessons learned from IFRS 9
- Data and infrastructure readiness
- Get in touch
- Related topics
A collection of insights to help you prepare for CECL’s impact
CECL promises to be one of the most significant accounting projects of the next five years. Right now, it may seem like there is plenty of time to comply with CECL. However, its significance and widespread impact demands banks take an early and disciplined approach to implementation.
As our recent survey of senior executives at 31 US banks reinforced, the new CECL standard will involve and drive changes across numerous facets of your bank’s operations including accounting/finance, IT, risk, the business units, and others. In addition to its major operational implications, CECL is expected to have an equally significant financial impact on impairment estimates, capital ratios, and the volatility of profit and loss.
Banks need to think strategically about CECL’s far-reaching implications and prepare for implementation as soon as possible, lest they fall behind on resource planning and critical deadlines. To help our banking clients get started, Deloitte is sharing its CECL knowledge and insights through a multipart collection of topical perspectives and companion webcasts.
Each of the pairings will address a key area of your business that CECL is likely to impact, with the goal of helping you form a more strategic and comprehensive view of your CECL challenges. From business impact, data management, and credit modeling to risk, governance, and technology, we’ll explore what’s at stake and what you can do to ready your organization for complying with CECL on time and with maximum effectiveness.
Lessons learned from IFRS 9
The first pairing in our series covers valuable lessons from implementations of the International Financial Reporting Standards (IFRS) and how they can be applied to your CECL compliance planning.
There is much that US-based banks can learn from institutions that prepare financial statements under IFRS and have adopted a similar credit loss model under IFRS 9. These institutions have been preparing for this standard since it was finalized in 2014. They have gained insight from the long implementation cycle that can be helpful to US-based filers—specifically around project governance and modeling decisions. Our webcast and written perspective share valuable insights and lessons on a number of CECL implementation challenges, including the steps financial institutions can take to get started:
- Face the challenge as a team. IFRS 9 and CECL represent the biggest change in accounting standards since standards were established. All of an organization’s functional areas—business, risk, accounting, modeling, and others—should be aligned and work collaboratively to develop and implement new loss estimation models.
- Ring-fence resources. Engage early and frequently with business and function heads during planning, development, and implementation.
- Learn early, fail fast, and do both transparently. Test multiple models and validation techniques within the organization’s existing technology to understand potential limitations.
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