Impact of CECL on specialty finance companies
The effective date for the new credit impairment model—released by the Financial Accounting Standards Board and commonly referred to as the current expected credit loss, or CECL, model—is the first quarter of 2020 for calendar year end Securities and Exchange Commission filers. Specialty lenders should begin their preparations now for what could be a number of major changes to the way they account for credit losses.
A number of new requirements could have a significant effect for most specialty finance companies, including:
- Recognition of life of asset expected credit losses on Day One
- Transition from an incurred loss model to an expected credit loss model
- Adjustment of historical loss experience for current conditions, and reasonable and supportable forecasts
- Adoption of special rules for purchased loans with credit deterioration
- Recognition of all subsequent changes in the allowance for credit losses in earnings through increases or decreases in credit loss expense
In this short presentation, learn about the effective dates for different entities, see examples of static pools and vintage analysis, and learn about key changes in accounting for credit losses for purchased loans with credit deterioration.
For more a deeper dive into CECL, check out our recorded webcast, Understanding FASB's new credit impairment model.