Financial institutions required to complete the current expected credit loss (CECL) standard implementation by 2023 are undoubtedly busy managing record-low net interest margins, pandemic-related uncertainties, and operational issues, as well as their own strategic initiatives.
However, the benefits of starting CECL implementation now are numerous, according to outside experts and financial institutions that have already adopted CECL. Many SEC registrants that implemented the accounting standard update in time for their 2020 deadline have said in hindsight, they would have started the CECL implementation process sooner.
“You’re never going to have enough time,” said Lance Holladay, Director of Regulatory Reporting at Renasant Bank, during Abrigo’s recent ThinkBIG Conference. “Start now.”
“At the end of the day, we still have regular jobs and daily responsibilities, and [CECL implementation] is added to that,” said Felicity Ours, CPA, CRC, Senior Vice President and Director of Credit at Summit Financial Group, which implemented CECL in 2019. “We are very fortunate to have individuals with strong IT and data analysis skills to help with this process, but I believe that will be a challenge, especially for some smaller institutions, so the longer the timeline, the better.”
One reason behind the Financial Accounting Standard Board’s (FASB) delay of CECL for smaller SEC-reporting companies and private institutions was for them to learn best practices from SEC registrants’ experiences.
The later CECL deadline was also expected to help later adopters avoid a last-minute scramble for audit, technology, and other assistance when implementation resources are in peak demand.