The New Impairment Model Under IFRS 9 and CECL
First published:
ISBN: 978-1-78272-347-9
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Introduction
Introduction
Introduction
The New Era of Expected Credit Loss Provisioning
The Marking of CECL Standard: Comments and Reflections
Sources of Modelling Variation in CECL Allowances
A CRO’s Perspective: Implementing, Operationalising and Governing of IFRS 9
Implementing Both IFRS 9 and CECL
Macroeconomic Forecasting and Scenario Design for IFRS 9 and CECL
Technology Solutions for CECL and IFRS 9
Implementing IFRS 9: Quantifying Expected Credit Losses in Retail and Wholesale Portfolios
From Incurred Loss to CECL: Historical Perspectives and Practical Guidance
Loss Forecasting Retail and Commercial Portfolios for CECL
Implementing CECL at Small and Community Banks
The New Impairment Model: Audit and Disclosure Challenges
The New Impairment Model: Governance and Validation
The Impacts of CECL: Empirical Assessments and Implications
How the New Impairment Model Could Affect Banks’ Business Models
Measuring and Managing the Impact of New Impairment Models on Dynamics in Allowance, Earnings and Bank Capital
Integration into Regulatory Capital Frameworks
Implications for Equity and Debt Investors
Reserving for credit loss is one of the most critical aspects of a financial institution’s accounting practice. Its objective is to cover incoming losses on impaired financial instruments due to defaults and nonpayment. Reserve measurement affects both the balance sheet and income statement. It impacts on earnings, capital, dividends and bonuses, and it attracts the attention of stakeholders ranging from the board of directors and regulators to equity investors. In response to the so-called “too little, too late” problem experienced with loss reserve during the Great Financial Crisis, accounting-standard setters – the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) – now require financial institutions’ provision against credit loss based on expected credit loss (ECL). Arguably, calculating ECL estimates under the International Financial Reporting Standards (IFRS 9) and the FASB’s current expected credit loss (CECL) model presents a momentous change, with the new standards coming into effect sometime between 2018 and 2021, depending on the jurisdiction.
The new impairment models replace existing “incurred-loss models” with more
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