CECL: The Current Expected Credit Loss Model Under ASC 326

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In June 2016, the FASB issued Accounting Standards Update 2016-13 (ASC 326). Among many changes, the ASU significantly changes the impairment model for most financial assets that are measured at amortized cost (and certain other instruments) from an incurred loss model to an expected loss model that will be based on an estimate of current expected credit loss (“CECL”). Our publication includes guidance and examples.

Editor’s note: The FASB has proposed two amendments related to ASC 326, Financial Instruments – Credit Losses, which, if finalized, would:

  • Address stakeholder feedback on the comparability and complexity for purchased financial assets.
  • Simplify estimating credit losses for current accounts receivable and current contract assets for private companies and specific not-for-profit entities.

Readers should monitor the FASB website for developments. BDO’s publications reflect current U.S. GAAP and have not been updated for these proposals, which are not effective and may not be applied. 

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