Nonpublic business entities are required to adopt CECL and adjust their opening retained earnings balances as of January 1, 2022.
Public business entities will adopt and adjust as of January 1, 2021.
While CECL seems far off, financial institutions will need as much time as possible to develop a holistic understanding of their data and their data strategy and determine how to manage the new process efficiently. Use this time to gather your institutions’ historical data and begin regression and forecasting and determine the tools needed to be successful. Having the right data – and enough data – will be key to implementing the new standards.
CECL is a forward-looking methodology that considers a broader range of reasonable and supportable information in estimating credit losses. The transition to CECL will impact institutions’ financial results and have major implications on data, modeling, and analytics requirements. Further, it will likely result in a fundamental re-evaluation of portfolio composition and business strategy.
Applying CECL is a multistep process—and one that can be difficult to achieve without a specialized and experienced team. Our professionals can help you apply the standard from start to finish, taking your current and future needs into account.
Here are a few of the services we provide:
- Data inventory assessment for quality and completeness
- Segment level methodology development
- Economic forecast scenario development
- Testing and validation
- Updating or developing policies and procedures
- Internal control over financial reporting.