CECL | Wolters Kluwer Financial Services OneSumX
  • Wolters Kluwer Financial Services Banner Image

CECL

  • When the Financial Accounting Standards Board (FASB) introduced a new impairment model, commonly known as CECL (Current Expected Credit Losses), applicable to the U.S. GAAP based countries such as the United States, Israel, Japan (limited), Switzerland (optional), it represented major shift from the existing incurred loss model.

    Like IFRS 9, financial institutions in these countries now need to adopt a forward-looking expected loss model. Unlike IFRS 9, CECL permits historical factors to retain a greater role in the process. Additionally, there is a difference in how the results of expected loss calculations are used throughout an organization and in reports to regulators and shareholders.

    Impairment and the expected credit losses model

    In support of the expected credit losses model within CECL, our solution will include:

    • Develop and build an expected credit loss model that needs to be run in multiple scenarios
    • Implement PD/LGD and EAD term structures based on best practices methodologies
    • Ability to implement from a tactical towards a strategic solution for IFRS 9 compliance
    • Expected Credit Loss calculators which can work with expert judgment or macroeconomic scenarios
    • Re-usage of methodologies such as vintage or loss rate methodologies as described by the standard
    • A combination of term structures based on forward-looking and historical extrapolation methodologies
    • Specific CECL reporting as described by the FASB
    • Accounting schemes that include the logic for the expected credit losses over the full instrument’s lifecycle
    • Support for calculation and subsequent accounting processing of credit-adjusted effective interest rate (EIR), amortized cost and effective interest for purchased or originated credit-impaired instruments

    Disclosures requirements

    • By combining the lifecycle information on each individual financial instrument with a transparent and auditable contract level CECL sub-ledger and powerful reporting tools, positions us for full compliance with CECL. The solution offers full transparency and traceability that fully satisfies internal and external audit needs.
    CECL Solution Architecture

    Click image above for larger version

    More reading

    Latest insights on CECL (See All)

    2nd Edition CECL 2018 Congress
    (Live Seminar March 21-22, 2018) Due to popular demand, The Center for Financial Professionals are proud to announce the 2nd Edition CECL 2018 Congress. Wolters Kluwer is pleased to be part of this event again and will lead a first time ever Mock Earnings Call for insights into questions your institution may face when the new CECL standard takes effect.

    CECL Video
    (Published May 3, 2017) Will Newcomer, VP, Market Management, Finance, Risk and Reporting Americas, Wolters Kluwer provides 5 key considerations to help firms prepare for CECL in the early stages.

    CECL: Preparing for the New Standard
    (Recorded Webinar 26 April 2017) Watch the Wolters Kluwer and Risk.net webinar on the new CECL standard to learn what challenges financial institutions are facing and how to achieve a successful enterprise wide implementation.