GAAP Flash – ASC 326, CECL and IFRS 9 – 10.26.18
GAAP Flash – ASC 326, CECL and IFRS 9 – 10.26.18

GAAP Flash – ASC 326, CECL and IFRS 9 – 10.26.18

This week’s GAAP Flash looks into the latest news on the Current Expected Credit Loss (CECL) standard, ASC 326. The effective dates are December 15, 2019 for SEC filers, December 15, 2020 for public entities, and December 15, 2021 for non-public entities. Although it seems far off, banks and financial institutions should start preparing for the new standard now!

So, what exactly should banks expect when adopting ASC 326? The new standard requires banks to reserve for expected losses, rather than incurred losses. The allowance for loan losses on the books will almost certainly increase! Implementing the standard will require new processes, systems, and internal controls. The institution’s size, and the nature, scope, and risk of their lending activities must be evaluated to determine a rational implementation plan. Accountants should be well aware of the possible workload with the implementation of the Revenue Recognition Standard and upcoming Leasing Standards. There is no time for procrastination!

We have been keeping a close eye on the news surrounding the new standard. Not only might the due date change slightly, but the FASB is looking into a request by Bank of America CEO Greg Baer to the U.S Treasury. Essentially, banks and financial institutions are concerned that the CECL approach to recognizing loan losses will deter banks from extending credit during tense economic conditions. Banks are hoping that the CECL implementation will be delayed. They are concerned that the standards require the future possible losses to be recognized upfront, which would magnify losses. With the economy feeling a bit rocky these days, it is no surprise that changing to the new CECL accounting standard is worrisome for financial institutions!


A helpful summary that was recently published outlines the differences and similarities between CECL and IFRS 9. Financial institutions and banks that are subject to the International Accounting Standards Board may have a head start with their implementation. The effective date for IFRS 9 was almost two years ago. Some of the work put into adoption of IFRS 9 may help with their CECL adoption. Learning about the IFRS standards now could help significantly! We are in the middle of a webinar series on IFRS 9 now, and will shortly be posting the entire series on our Revolution learning platform where they will be available for you to take at any time!

There are many questions that are coming up as CECL is being evaluated by banks. We try to stay on top of some questions you may have about the new standard. For instance, can there be zero expected credit losses? We wrote an entire blog on that topic! Spoiler alert – probably not, but it is possible! For those of you looking for an overview of the ASC 326 provisions, we also wrote a blog that summarizes the guidance and outlines the changes!


In case you haven’t figured it out yet, GAAP Dynamics is a very good friend to have! We love everything accounting and are driven to provide superior accounting training all over the world! Hang out with us anytime, anywhere and enjoy our variety of courses. You can earn CPE credits by taking courses on the Revenue Recognition Standard, Investment Management, Foreign Exchange, and many more!  Our Revolution has courses being added constantly, so keep us in mind before you turn to Google to answer your accounting questions!


This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

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