The New Impairment Model Under IFRS 9 and CECL
First published:
ISBN: 978-1-78272-347-9
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The Marking of CECL Standard: Comments and Reflections
Larry Smith
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
In June 2016 the Financial Accounting Standards Board (FASB) issued ASU 2016–13, “Financial Instruments-Credit Losses”, its response to some of the financial reporting issues associated with the global financial crisis. This standard is a major change to the existing model for recording credit losses, which is generally referred to as the incurred-loss model. The project had its origin in October 2008, when the FASB and the International Accounting Standards Board (IASB) created the Financial Crisis Advisory Group (FCAG) to identify financial reporting issues and potential solutions to the issues arising as a result of the global financial crisis.
I was a member of the FASB from July 2007 through June 2017 and was therefore directly involved with the discussions and decisions that led to the issuance of ASU 2016–3, although I was one of two FASB members who dissented to the standard.11 Board member James Kroeker and I dissented to ASU 2016–13 for the same reasons. Our written dissent begins on Page 235 of the published ASU. The primary reason for our dissent is that we disagree with the requirement to recognise a credit loss at origination or purchase at an amount that represents
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