Don’t Let CECL Consume ALL Your Attention: Tips to Keep Your Incurred Loss Model Top of Mind

With the spotlight focused on the much anticipated Current Expected Credit Loss (CECL) guidance, has the incurred loss model for the allowance for loan losses (allowance) taken a backseat with bankers, auditors and regulators? We don’t think so. While CECL guidance is expected to be released in the fourth quarter of 2015, with adoption likely to be no earlier than 2018, the allowance still is required to be recorded in accordance with generally accepted accounting principles using an incurred loss model. With significant changes to assumptions that have played instrumental roles in building the level of allowance over the past few years, heightened focus should be placed on the challenges we are facing under the incurred loss allowance model today.