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|Event Name:||Measurement of Credit Losses: “Incurred Loss” is OUT, CECL is IN|
|Date:||Friday, January 27, 2017 11:00am CST|
|Panelist(s) Info:||Paul J Sanchez - Owner PSA, Professional Services Associates|
|Credits:||1.5 CPE Credits|
This webinar will focus on the recently issued FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326). As a result of that ASU, financial institutions must discontinue using the current GAAP incurred loss method for determining the allowance for loan and lease losses (ALLL).
The long-standing incurred loss model will be replaced with a new current expected credit loss (CECL) model. CECL requires assets at the balance sheet date based on:
The ALLL determination will still be subjective and will require many currently used management judgments about past events and current conditions. CECL will also require forward-looking information (i.e. forecasted information) to reflect the full amount of expected credit loss over the life of the financial assets (the loans).
This session will emphasize that no single method for estimating credit losses is mandated. It will however emphasize the following requirements:
Each institution must develop its own method to support its reasonable estimates of its expected credit loss forecasts. Accordingly, the session will briefly review illustrations of various approaches to credit loss estimation.