CECL Adoption: What Financial Institutions Should Know

What have we learned from the Current Expected Credit Loss standard?

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Now that banks are completing their third call report for the 2023 calendar year, we want to share some valuable insights and lessons learned as adoption of ASU 2016-13 (Current & Expected Credit Losses/CECL), is well underway.

We have had the privilege of addressing numerous questions from clients now that CECL has been reported on the call report, potentially been through a regulatory exam, and has seen widespread implementation.

We compiled these key insights into a short checklist to assist in the adoption of ASC 326:

  • Don’t forget to update your policy.  

    • As bankers begin digging into the specifics of CECL, it can be easy to forget to update the Allowance for Credit Losses (ACL), formerly ALLL, policy.
    • Make sure you are documenting any assumptions made, including support for the forecast and historical look-back periods used.
  • Exclude any individually evaluated loans from those that are pooled.
    • Once a loan has been classified as such that individual evaluation for an allowance is considered, GAAP requires that loan be removed from pooled loans.
  • Rename the general ledger (GL) accounts.
    • Change the name in the GL to Allowance for Credit Losses/ACL, etc.
  • Evaluate unfunded commitments.
    • If there is a reserve needed for unfunded commitments, be sure to set up a separate liability GL account.
  • Double check any information utilized by a third-party ACL software.
    • If the bank engaged a third-party to provide a software for ACL analysis, be sure to periodically do a double check.
        • This includes any information automatically uploaded from the core system.
        • This includes any peer information uploaded.
    • This is crucial to ensure the software is analyzing what it should be.

Additional Insights to Keep in Mind

The CECL accounting standard leaves a lot to interpretation and assumption, including:

  • A reasonable and supportable forecast period.
  • A reasonable and supportable historical look-back period.
  • A specific methodology to adopt.
  • Various policy elections to be made at adoption.

There will be new, expanded disclosures for banks with GAAP-compliant financial statements.

  • This also includes expanded troubled debt restructuring (TDR) disclosures as well.


If you have specific questions about CECL, please reach out to your Pinion adviser.


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