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CECL Disclosures: What’s Changing?

Brandy Aycock
May 28, 2018
Read Time: 0 min

Again this year at the National CECL Conference, Dorsey Baskin, partner emeritus of Grant Thornton, explained how typical ALLL disclosures will change under CECL.

Because financial institutions will account for their loss allowances differently under CECL than under the current incurred loss model, the Financial Accounting Standards Board (FASB) had to modify allowance disclosure requirements. The FASB’s intent was to introduce new disclosures only for the part of the credit loss guidance that relates to reasonable and supportable forecasting and retain the existing disclosures. 

With the new standard there had to be changes to disclosures so that financial  institutions may better explain the risk in their portfolios.

The extensive whitepaper, “CECL Modifications of Typical ALLL Disclosures” authored by Dorsey Baskin and Rahul Gupta of Grant Thornton presents a complete sample disclosure document, including charts. Each section is accompanied by notes explaining the related CECL guidance and defining disclosure nuances. A companion report, “Loan, Debt Security, and ACL Disclosures Required by CECL,” contains the disclosure language from the FASB guidance, highlighting areas that are new or modified from the disclosures as required by the incurred loss standard.  

Much of the difference in the disclosures relates to changing terminology. For example, the disclosures will no longer speak of “impaired loans” but of “expected credit losses for all loans and held-to-maturity debt securities.” As well, the “provision for loan and lease losses” is now called “expense for credit loss.” 

A summary of the changes:

  • Vintages required by public business entities on amortized cost basis (everything in CECL works off amortized costs basis)
  • Disclosure of how the institution developed its reasonable and supportable forecast
  • Discussion of reversion methods
  • The roll forward for purchased credit loans
  • Allowance has to be shown on balance sheet
  • Disclosure of amortized costs for nonaccrual loans
  • For off-balance credit sheet where there is a liability estimate: allowance shown separately as a liability

The whitepaper and companion report are available through the MST Academy.

Download the full report CECL Modifications of Typical ALLL Disclosures.

About the Author

Brandy Aycock

Brandy Aycock is Director of Event Marketing at Abrigo.

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Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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