EXPOSURE DRAFT EXPECTED CREDIT LOSS
The exposure draft on Credit Impairment from FASB contained several examples. This whitepaper discusses the use of static pool analysis in determining the allowance estimate and provides examples of ways to utilize this methodology in developing your estimate.
Now that FASB has decided to move away from the three-bucket approach, the discussions are focusing on the Current Expected Loss Model (CECL). This model uses the same core concepts to arrive at the allowance loss estimation without having to apply different methods to the same loans after moving between loss buckets.
Our second whitepaper on FASB's Exposure Draft for changes to the Allowance For Credit Losses discusses the new disclosure requirements as part of the expected loss accounting changes. The new disclosures will require even more details about policies, processes and methodologies used in the allowance estimation process.
FASB has finally issued the revised standards for the allowance based on the expected credit loss model. This first of a series of whitepapers on the exposure draft focuses on the total rewrite of the existing standards including purchased impaired loans.
FASB approved a group of key concepts at the September board meeting. These decisions allow the FASB staff to craft a final standard for review and approval by the board.
FASB issued a 36 page document discussing the responses received before and during the exposure process with both Users and Preparers of financial statements. Both groups have some similar and differing views on the new standard and the direction they think FASB needs to move in finalizing the standard. This document summarizes those responses.