The Center for Audit Quality has introduced a new guide to assist audit committees at overseeing their companies efforts to comply with the new credit losses accounting standard.
The Financial Accounting Standards Board's new standard, which relies on a current expected credit loss (CECL) model, will take effect around January 2020. Public companies that file with the Securities and Exchange Commission will need to adopt CECL guidelines for fiscal years starting after Dec. 15, 2019, while other types of public business entities will have to adopt the CECL guidelines for fiscal years beginning after Dec. 15, 2020. The standard mainly affects banks and financial services firms, but other types of businesses may also be affected by the new rules, which apply to loans and credit.
The CAQ is referring to its new guide as a tool. The CAQ tool,
- "Understanding the Standard" offers a brief overview of the core principles of the standard.
- "Evaluating the Company’s Impact Assessment" suggests questions that audit committees may consider when discussing the impact that the credit losses standard will have on the company with management and auditors.
- "Evaluating the Implementation Plan" helps audit committees understand and evaluate management’s implementation plan.
- "Other Important Implementation Considerations" discusses other considerations for audit committees such as transition methods and new disclosure requirements.
“The new standard has broad implications and will fundamentally change how companies account for credit losses,” stated CAQ executive director Julie Bell Lindsay, who is succeeding longtime CAQ leader Cindy Fornelli. “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.”
