CECL Provisions Consistent with Final Draft
Former CECL Project Manager Rahul Gupta comments on the release of ASU 2016-13.
CECL is here. And according to Rahul Gupta, the Grant Thornton partner who had served in the past as the FASB CECL project manager, it and its implementation dates are final.
“The Board has no plan to defer the effective date for CECL,” he told MST. “It’s coming and you are going to have to apply it.”
According to Gupta, the guidance – ASU 2016-13 is posted at www.FASB.org – is consistent with the latest draft posted on the FASB’s website in March of this year. “Some of the language has been changed to make it clearer, but nothing substantive.”
Any substantive changes, he explained, would have had to go back to the Board discussion at a public meeting.
What should an institution do now that CECL is a reality? Gupta suggests reading the guidance and accompanying documents posted on FASB.org this morning.
“The standard itself is not a difficult or technical read,” he said, pointing out that it is detailed in about 50 pages of the 290-page document. “There is also a four-page summary of the guidance and a four-page summary of costs and benefits.” The costs and benefits summary addresses concerns about the expenses related to implementing CECL, he noted, “to explain why FASB believes it’s not going to be as costly as some had thought.”
The FASB website also offers a video explaining the key points of the standard, and a form for submitting questions about CECL to FASB. Gupta said that the FASB staff will pass along questions that need additional discussion to the Transition Resource Group. Technical Queries submitted to the staff through the FASB’s Technical Inquiry Service is also an avenue to ask any questions you may have on CECL.
“Read the guidance, see how it applies to your institution and start thinking about any issues you might encounter,” Gupta advises. “Then start preparing for implementation.”
Mr. Gupta explained the Scope of CECL in a short video at the 2016 National ALLL Conference. For the MST Talk video, click here.
Over the coming months watch for MST Talk videos to come out on many of the topics covered in the National ALLL Conference sessions. These 7-9 minute videos are full of key takeaways for anyone involved in estimating loss reserves.