Current Expected Credit Losses: How To Account and Audit Them

Author: Salvatore Collemi

The Financial Accounting Standards Board’s (FASB) new standard on estimating current expected credit losses (CECL) will change the existing accounting and reporting rules for the impairment of financial instruments by incorporating an expected losses approach rather than incurred losses. This course will:

• Provide you an overall explanation of the key requirements of ASC Topic 326
• Help you understand the details and challenges involving the implementation and the auditing of such transactions
• Assist you in identifying existing information gaps as well as the potential changes to a private company’s internal controls and processes for adopting ASC Topic 326
• Discuss the key financial statement disclosure requirements

Publication Date: August 2023

Topics Covered

• Overview and Introduction
• Management's Estimates Represents Lifetime Losses of Instruments
• Available Measurement Approaches
• Scope of New Standard
• Management's Challenge
• Audit Committee Oversight
• Internal Control Considerations
• New Standard vs. Legacy GAAP
• Select Key Accounting Issues
• Presentation and Disclosure Considerations
• Communications with Those Charged with Governance

Learning Objectives

• Identify the new accounting and reporting requirements in ASC Topic 326 for recording and disclosing estimated credit losses and impairment of certain debt securities and other financial instruments
• Identify the ASU that introduces an impairment model known as the "current expected credit loss (CECL) model", which is based on expected losses rather than incurred losses
• Identify the model that estimates expected credit losses by applying an estimated loss rate to the asset's amortized cost basis

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Accounting (1 hour), Auditing (1 hour)

Program Prerequisites
Some experience in performing audit and SSARS review engagements

Advance Preparation
None