On November 19, 2019 the SEC issued SAB 119 to align its guidance with the FASB’s Current Expected Credit Loss Standard, ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new SAB updates existing guidance dealing with what the staff expects of companies as they develop methodologies and supporting documentation for measuring credit losses.
The SAB addresses areas that will sound very familiar to professionals who have been dealing with the new, subjective estimates required to implement the new standard, including:
- Measuring current expected credit losses
- Development, governance, and documentation of a systematic methodology
- Documenting the results of a systematic methodology
- Validating a systematic methodology
The SAB will be most relevant for financial institutions but could be helpful for all entities. As of the date of this writing there is one formal detail still in process for the SAB, publication in the Federal Register.
As always, your thoughts and comments are welcome!