More than one-fourth of financial institutions indicated recently they are in the final stages of implementing a new accounting standard that requires a more forward-looking approach to accounting for debt instruments, but nearly an equal number are still in the early stages.
That’s the result of a new poll by software firm SS&C Technologies Holdings on bank readiness to use a “current expected credit loss” approach to reflecting credit-related financial instruments in financial statements. Accounting Standards Codification Topic 326 requires companies to use a combination of their own historic data and market data to estimate where and in what amounts it will see trouble in its debt portfolio. Taking effect beginning in 2020 for publicly traded companies, the new accounting under ASC 326 compels companies to book projected losses even at the inception of new, fully performing arrangements.
