Implementing CECL During the Pandemic

Unexpected Consequences Revealed

Arianna S. Pinello, PhD, CPA, CIA, and Lee Puschaver, CPA

In BriefThe much-anticipated and -deliberated changes to the accounting for financial instruments ushered in by ASU-2016-13, Financial Instruments–Credit Losses, happened to take effect during an unprecedented economic crisis brought about by the COVID-19 pandemic. This coincidence provides insight into management's decision making in a crisis and a test of whether the guidance meets the needs and expectations of users. The authors' analysis of selected CECL disclosures from last year concludes that management's judgment often influences and even overrides the results generated by CECL modeling; although conservatism may have been warranted under extraordinary circumstances, users might justifi-ably wonder whether such judgment is consistent with the goals of the standard.