The Road to New Reality: CECL Modeling during (and after) COVID-19

COVID-19 has caused significant disruption in the global and US economy – all of this occurring during the early stages of adoption for one of the biggest accounting changes in recent years – the adoption of Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). In designing, implementing, and executing CECL methodologies – many institutions are seeing firsthand how CECL models respond to this unprecedented level of economic instability. It is inherently difficult to plan for such “Black Swan” events; however, COVID-19 has highlighted the importance of a CECL modeling process and methodology that performs strongly during both stable times and edge cases.