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CECL Prep: Building a Strong Data History

With FASBs final CECL rules out, credit unions should prepare by aggregating loan-level data for their portfolios.

By Patrick Weightman | Updated on June 22, 2016
The Financial Accounting Standards Board’s long-awaited new standard for measuring expected credit losses was issued on Thursday, June 16.

The CECL standard will be effective for credit unions beginning for fiscal years after Dec. 15, 2020. For a smooth transition, it is important for credit unions to begin preparing now.

Directors should be educated about the credit union’s current processes for mitigating risk and plans for mitigating risk in the future. In addition, the quality of the credit union’s ALLL methodology and data will play a role in how prepared it is for changes under CECL. As a result, experts recommend accessing training in calculating reserves and in documenting those calculations. The more transparent the calculation is today, the easier it will be to explain changes made to comply with CECL and the more insight the institution will have regarding sources of credit risk.

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