Succeed in the new era of credit loss accounting
Businesses of all sizes, public and private, will be or already have been affected by the transition to the Current Expected Credit Loss (CECL) model.
At CFGI, we help organizations understand the full extent of CECL’s impact on financial operations and can deliver end-to-end oversight for the transition to the new credit loss accounting model.
Covering all the bases
Our blend of financial and technological expertise uniquely qualifies us to address the three core elements of transitioning to CECL:
- Information technology: Data standards, data quality, infrastructure management, user access and other IT-related factors.
- Risk: Model selections, model estimates, model implementations, sensitivity analysis, loss forecasting and other evaluations.
- Accounting and finance: Financial reporting processes adjusted to account for new data, disclosures and controls associated with CECL modeling.
CFGI’s cross-functional expertise can help organizations facilitate collaboration among the right stakeholders to address and optimize the inter-related, co-dependent workflows tied to CECL modeling.
CFGI’s five-phase adoption roadmap
Estimating the expected losses of a loan at origination is not a simple task, and there is no one-size-fits-all transition plan for achieving it.
That’s why CFGI has developed a five-phase roadmap that’s instructive enough to be useful, but also flexible enough to conform to each organization’s idiosyncrasies. Our in-house CECL experts can provide guidance and assistance at each of these phases:
1. Understand CECL and data collection
We help organizations to understand the new standard and to take stock of the people, processes and technologies involved in CECL modeling at their company. Additionally, we aid in the development of a cross-functional team of IT, risk, and finance and accounting stakeholders who can document and organize the many overlapping elements of transitioning to CECL.
2. Risk identification and technology implications
We help identify credit-risk characteristics that influence the selection of models for forecasting expected credit losses. Historical data, current conditions and supportable forecasts are all involved in determining credit risk for portfolio segments.
3. Management oversight
We help organizations document their technical accounting conclusions as well as policies, controls, statements about what CECL implementation will mean for their market and other information that auditors, regulators, analysts and investors care about.
4. Financial reporting
We assist in creating a repeatable set of processes that make it easier to reconcile allowances with data, disclosures and analytics. This is also a chance to ensure internal controls developed in earlier phases are working effectively.
5. Investment accounting
Following CECL adoption, we can also help businesses apply the CECL model to financing receivables other than loans and leases, including investment securities such as HTM and AFS debt, which will be subject to CECL in late 2020.
Meet with one of our CECL experts today to learn more.