Ariste Reno, Protiviti Managing Director, and Benjamin Shiu, Protiviti Director
As we continue our series of articles examining the AICPA Practice Aid on preparing for the new current expected credit losses (CECL) standard, this article on modeling considerations is especially timely given the economic upheaval of the ongoing COVID-19 pandemic and the dramatic effect that it is having on loss models. Many of the assumptions built into January models were no longer valid by March of 2020. That has forced many institutions to adjust their models to this new reality.
Part 4 of our AICPA Practice Aid highlights the pandemic’s impact on loss models and provides key considerations finance firms can use to optimize model performance.