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CECL: A Credit Union Guide

The CECL guidance is not cause for panic, and an additional delay in the finalized guidance only underscores that point.

By Tim McPeak | Updated on November 08, 2015
Tim McPeakWith the Financial Accounting Standards Board announcing another delay in the release of its final guidance on the Current Expected Credit Loss model, it may be tempting to put the changing guidance and effect it will have on allowance levels in the back of your mind. And you wouldn’t necessarily be wrong. The CECL guidance is impactful, certainly, but it’s not cause for panic, and this additional delay in the finalized guidance only underscores that point.

However, delay or no delay, the final accounting standard is coming down the pipeline eventually. And it’s rare to see regulatory changes with such a direct effect on the allowance in the way CECL is expected to. Regardless of when the proposal is finalized, there is a clear benefit to thinking proactively today about how the CECL guidance might affect your credit union and your credit union’s allowance for loan and lease losses calculation.

Currently, institutions calculate the ALLL based on well-established accounting and regulatory standards that have had only minor changes and updates over the past several years. While the exact CECL requirements have not been finalized, CECL will fundamentally change the loan loss reserve calculation and likely have implications across day-to-day operations for the credit department.

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