KPMG is partnering with analytics provider SAS on helping banks make the transition to the current expected credit loss, or CECL, accounting standard that begins to take effect in January 2020.
The new standard will change the way many financial institutions estimate, reserve and report on losses on loans. The Financial Accounting Standards Board introduced CECL as the new standard for the recognition and measurement of credit losses for loans and debt securities in an effort to ensure better loss coverage. The two companies are also helping banks deal with the International Accounting Standards Board’s separate standard for financial instruments, IFRS 9. Despite years of work on converging the financial instruments accounting standards, FASB and the IASB were unable to fully converge U.S. GAAP and International Financial Reporting Standards in their approach to accounting for credit losses and impaired bank loans, so they issued separate versions of the standards.
However, KPMG and SAS at least are in alignment. "These changes are significant in terms of how banks will manage risk and financial data, build their analytic platforms and share information between departments," said Troy Haines, senior vice president and head of the risk management division at SAS, in a statement. "By aligning with KPMG in the United States, we are helping customers improve business performance and turn risk and compliance requirements into opportunities."
KPMG is taking a broad approach to CECL and IFRS 9 adoption, providing services related to the accounting and regulatory changes along with wider risk management and financial data environment.
"The alliance will provide CECL and IFRS 9 offerings that combine the capabilities and resources of two market-leading providers: KPMG with enablement services including in-depth accounting, finance, tax, modeling and risk specialization, and SAS with the dedicated expected credit loss software platform," said KPMG risk analytics advisory managing director Ed Bayer in a statement. "The alliance delivers industry-leading services and technology to help banks navigate the new guidelines."
Under the partnership, KPMG will assess a bank’s existing accounting policies, data availability, modeling capability and internal controls and design an implementation roadmap according to the requirements of the new standards. SAS will provide SAS Expected Credit Loss, a solution already in use by more than 75 financial institutions. It supports the CECL calculation and reporting process and helps banks meet the data and reporting requirements for their risk and finance departments.
For more information, visit www.kpmg.com/us/sas.