The Marking of CECL Standard: Comments and Reflections

Larry Smith

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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