Impact of the New Current Expected Credit Loss (CECL) Methodology

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By
Protiviti

Current U.S. Generally Accepted Accounting Principles (GAAP) account for credit impairment using an ‘‘incurred loss’’ model. Many have argued that this model recognizes too few losses too late and suggest a more forward-looking ‘‘expected loss’’ approach. To address this, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) devised a common solution, which FASB has now further amended. In this article, Protiviti provides a summary of the FASB’s proposed CECL methodology and outlines some of the challenges and opportunities the amendment raises.

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