CECL and COVID-19: Q1 Reflections and Insights

As the dust has settled and most large U.S. Securities and Exchange Commission (SEC) financial institutions have reported Q1 results via their Form 10-Q reports, the first disclosures and financial information regarding implementation of the current expected credit losses (CECL) accounting standard are now available for investor/public consumption.

A provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed larger SEC registrants that implemented CECL as of Jan. 1, 2020, to delay CECL reporting to either the end of 2020 or sixty days after the declaration of the end of the COVID-19 national emergency. The provision was created due to concern that financial institutions would restrict credit to maintain capital during a time when many businesses will need access to credit to stay afloat. The provision also suspended accounting requirements for troubled-debt restructurings (TDRs) and eased some regulatory capital requirements, making it easier for financial institutions to provide relief to their customers.

ABOUT THE AUTHORS

Michael Badger
Manager, Risk Advisory

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