New Accounting for Credit Impairment: What You Need to Know

Since the financial crisis, the Financial Accounting Standards Board (FASB) has been debating wholesale changes to the U.S. generally accepted accounting principles (GAAP) credit impairment model. The FASB completed the majority of its deliberations in April and expects to issue a final standard in the fourth quarter of 2015. This standard, which uses the current expected credit loss (CECL) model, will fundamentally change the way the allowance for credit losses is calculated. The standard will have a pervasive impact on all financial institutions, and questions are circulating about what changes are in store.