Credit losses standard tips for audit committees

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Credit losses standard tips for audit committees

FASB’s new credit losses standard presents new challenges for company financial reporting teams, especially in financial services.

The new standard requires a new current expected credit loss (CECL) model and is designed to enable financial reporting of credit losses that financial institutions are expecting.

A new Center for Audit Quality (CAQ) tool provides audit committees with information to consider as they perform their oversight role related to the new standard, which will have a substantial impact on accounting for companies in the financial services sector and will affect other companies as well. The CAQ is affiliated with the AICPA.

“The new standard has broad implications and will fundamentally change how companies account for credit losses,” CAQ Executive Director Julie Bell Lindsay said in a news release. “Investors are looking to understand the impact of the new standard, and our tool is designed to help audit committee members, auditors, and company management understand that impact and to plan for a timely implementation.”

The effective date for calendar year-end public companies that meet the definition of an SEC filer is Jan. 1, 2020. Calendar year-end public business entities that do not meet the definition of an SEC filer have an effective date of Jan. 1, 2021, and private companies with a calendar year end have a Jan. 1, 2022, effective date.

In their oversight role, audit committees, according to the CAQ tool, should be aware of:

The tool also provides information for audit committees to consider as they evaluate the company’s impact assessment and evaluate the implementation plan for the standard.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

Research & References of Credit losses standard tips for audit committees|A&C Accounting And Tax Services
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