The American Institute of Certified Public Accountants has issued two draft papers that address – in a generally positive way — issues related to the implementation of the Current Expected Credit Loss standard, which will require banks to record credit losses at origination based on the life-of-loan loss expectations.
“Zero Expected Credit Losses” concludes that reasonable judgments regarding the same or similar assets might result in different conclusions on the expectation of nonpayment being zero. “Reversion Method: Estimation vs. Accounting Policy” concludes that the reversion technique used (if any) in estimating expected credit losses is an accounting estimation technique and not an accounting policy election.
Comments on the draft papers are due Oct. 10. The American Bankers Association welcomed the issuance of the papers and will be providing detailed feedback.