CECL has brought about many changes to long established accounting practices. The concept of impaired loans as well as the impaired loan process has been removed under CECL (ASU 2016- 13). However, FASB allows for loans to be evaluated based on the current value of the underlying collateral should certain criteria be met. This methodology is known as collateral dependent and is very similar to the current impaired loan process when it comes to allowance calculation (not identification). Worth noting is that there are fundamental differences between the two and collateral dependent loans are not intended to be a direct replacement of the current loan impairment process.
About The Author
Mike has been providing accounting, consulting and auditing services to financial institutions for over 30 years. Considered the “CECL Guru”, Mike was selected by the AICPA to create and deliver their 8-hour CPE course on CECL. He is a past member of the Auditing Standards Board and a published author on Accounting and Auditing for Financial Institutions. Mike has spoken at numerous AICPA conferences as well as other national and local financial institution associations. Mr. Umscheid is also the author of the 8-hour CPE course published by the AICPA for CECL.Mike is currently the President and CEO of ARCSys, a consulting firm that specializes in Allowance for Credit Loss software and CECL. He graduated from Virginia Polytechnic Institute and State University in Blacksburg, Virginia. Mike enjoys working out in the morning before work and loves to cook for his family and friends.