This free, guided checker walks your finance team through the key decision points for ASC 326 Current Expected Credit Loss (CECL). Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
The CECL model applies to financial assets measured at amortized cost, such as loans, trade receivables, held-to-maturity debt securities, contract assets, and net investments in leases, plus certain off-balance-sheet credit exposures.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
Available-for-sale debt securities follow the ASC 326-30 allowance model rather than CECL; other scoped-out assets follow their own measurement guidance.
Apply the ASC 326-30 available-for-sale credit loss model. Outside ASC 326; apply the asset's governing measurement guidance.
Official guidance: FASB Accounting Standards Codification
Pooling is required when similar risk characteristics exist, for example aging, credit rating, asset type, or geography; assets that stop fitting a pool move to individual evaluation, and both routes lead to the same lifetime measurement.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
CECL is a lifetime measure: adjust the contractual term for expected prepayments, but do not extend it for expected renewals or modifications unless the borrower's extension option cannot be unconditionally cancelled by the entity.
Extend the loss horizon to the full remaining contractual term.
Official guidance: FASB Accounting Standards Codification
Do not rely solely on historical loss rates; adjust for current conditions and reasonable and supportable forecasts, and document the reversion technique used for periods beyond the forecast horizon.
Document forecast adjustments and a reversion approach for the estimate.
Official guidance: FASB Accounting Standards Codification
Expected credit losses are recognized when the asset is originated or purchased and remeasured at each reporting date; there is no probability threshold or triggering event.
Recognize the allowance for lifetime expected credit losses at each reporting date. Record and update the allowance each period without waiting for a loss trigger.
Official guidance: FASB Accounting Standards Codification
A PCD asset is one that has suffered a more-than-insignificant deterioration in credit quality since origination as of the acquisition date; assess this with reasonable judgment and criteria applied consistently, such as past-due status, downgrades, or nonaccrual status. The distinction matters because the day-one allowance on a PCD asset is added to the purchase price rather than recognized as credit loss expense. A common trap is treating an ordinary purchased performing loan as PCD, or overlooking a purchased distressed pool that qualifies.
Apply the PCD gross-up: add the initial allowance to the purchase price to establish the amortized cost basis under ASC 326-20-30-13.
Official guidance: FASB Accounting Standards Codification
Send us your situation and one of our senior CPAs will review it with you - fixed fee, no surprises.
Contact Us