ARTICLE | October 05, 2023


The Current Expected Credit Loss (CECL) standard, part of the Accounting Standards Update No. 2016-13, was initially designed to address the financial crisis of 2007-2008. However, CECL applies to all companies, not just financial institutions, and requires a forward-looking approach to credit loss estimations. Companies with significant trade or accounts receivables, notes, loans,  or other receivables are all impacted by CECL. The standard is effective for non-public companies for years beginning after December 31, 2022. Therefore most private companies are expected to adopt CECL as of January 1, 2023, marking a shift from the incurred loss model to a model that estimates probable future losses.

Why CECL Compliance Matters

The aim is to standardize reporting and shift focus onto the collectability of assets. CECL presents an opportunity to align reporting with actual business operations and decision-making, providing business owners and investors with a more accurate understanding of a company’s financial health.

Failure to comply could result in financial misstatements, restatements, and regulatory inquiries, emphasizing the necessity for accurate CECL implementation.

Implementing CECL

CECL compliance can be a complex process that involves estimating and recognizing expected credit losses over the life of certain financial assets such as receivables, loans, and leases. The new standard does not require companies to discard old methods of reserving losses based on historical percentages. Instead, it requires them to expand their analytical scope to include future expectations. The implementation of CECL requires a rigorous analysis of the creditworthiness of a company’s customer base and a detailed understanding of current economic conditions alongside reasonable and supportable forecasts.

Given the intricacies involved, many companies may need additional help to adopt CECL. This is where Insero’s Technical Accounting and Consulting Group comes into the picture. Our team can assist in validating loss rate models,  providing technical accounting support, and helping with financial statement presentations and disclosures. Our experts with experience in technical accounting and compliance can help guide businesses through the maze of loss rate models that reflect both historical losses, macroeconomic forecasts as well as probability of default. Our Technical Accounting and Consulting Group can assist with documenting your assumptions in an implementation memorandum which is are integral to CECL compliance.


CECL is undoubtedly a challenging standard to adopt, particularly for private, non-financial services companies. However, with the right guidance and support from our Technical Accounting and Consulting experts, companies can successfully navigate this transition and ensure compliance. By doing so, they will not only meet the standard’s requirements but also gain a more nuanced and forward-thinking approach to managing credit risks, ultimately strengthening their financial resilience and business operations. Contact us today to learn more.

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Call us at (800) 232-9547 or fill out the form below and we’ll contact you to discuss your specific situation.

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About the Author: Ann Montgomery

Ann leads our Technical Accounting and Consulting Group with over 20 years of experience in public accounting. Meet Ann >


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