CECL Implementation Guide

CECL Implementation Guide

Get Ready, Here Comes CECL

In June 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard to replace the “incurred loss” impairment methodology with the Current Expected Credit Loss (CECL) model, marking a significant shift in the way credit losses on many financial assets—especially loans—are recorded. It is effective beginning after Dec. 19, 2019 for public business entities required to file with the SEC and after Dec. 15, 2020 for all other public and nonpublic business organizations, with early application open to all institutions with fiscal years ending after Dec. 15, 2018.

CECL applies to all banks, savings associations, credit unions and financial institution holding companies, both public and private, regardless of size, that are required to file financial statements in conformity with U.S. GAAP.

The new standard may also affect insurance companies as well as any entities outside the financial services industry that have active financing activities. It applies to all financial assets measured at amortized
cost, including:

  • Loans held for investment

  • Net investment in leases

  • Off-balance sheet credit exposures

CECL also applies to investments and securities that are held to maturity, as well as reinsurance and trade receivables. The calculation methodologies for these assets will not be covered in this guide as it is intended to focus solely on loans, leases and offbalance sheet credit exposure.

CECL does not apply to trading assets, loans held for sale, financial assets for which the fair value option has been elected or loans and receivables between entities under common control.

While the new CECL standard is applicable to every organization required to issue financial statements in compliance with U.S. GAAP, financial institutions—the focus of our guide—face the heaviest implementation burden. For banks and other financial institutions, transitioning to CECL is a highly complex change management initiative that has far-reaching implications beyond the accounting department. Not only does
CECL impact your internal accounting policies and procedures, it may have a material impact on your financials and how you manage your capital.


Is your financial institution ready for CECL? The key is not to underestimate the complexity of implementing the new standard.


The Biggest Change to Bank Accounting—Ever

Drawing from lessons learned during the global financial crisis, the FASB approved the final current expected
credit loss model in June 2016 with the purpose of limiting the impact of potential losses in a future
financial meltdown.

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Getting Started

For CECL to succeed, financial institutions need to understand how the new standard affects systems, technology and processes and where interdependencies exist. 

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Your CECL Implementation Roadmap

Once you have defined a target state, you can evaluate your current state to determine which existing ALLL processes you can leverage or refine and where you have holes. The goal of this gap assessment is to identify and prioritize areas for remediation and build out your detailed implementation plan.

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The Key to a Successful Transition

A successful transition program will leverage your institution’s existing processes and tools, facilitate collaboration between your stakeholders and offer options and access to technology.

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About BDO’s CECL Solution

BDO’s CECL team brings together senior professionals with deep financial industry, accounting, IT and operational experience to help your organization prepare for CECL.

We provide support across the CECL implementation lifecycle, and can help your organization:

  • Accelerate implementation and steady state compliance.

  • Facilitate collaboration between stakeholders.

  • Leverage existing processes and tools.

  • Explore options and access to the right technology.