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Implementation of ASU 2016-13 Current Expected Credit Losses
I have a fairly technical question.
I’m wondering how other non-profit financial managers have implemented ASU 2016-13: Financial
Instruments – Credit Losses (Topic 326). Nonprofits must develop
the allowance for credit losses (ACL) as of January 1, 2023, and calculate an adjustment as of 12/31/23. Rather than using the model in which we figure expectations
of future collections or the probability of a loss happening, we now have to record current and expected losses at the time the receivable is recorded. I’ve read the standard and we’ve decided to use a Loss-Rate Aging Method. My challenge is that the organization has written off very few invoices in the last 10 years, and I don’t know how to determine the historical loss rates. Any feedback or suggestions are greatly appreciated. Is anyone else struggling with this? Have you gotten guidance from your auditor? -
1 Reply
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Hi Janet…thanks so much for posting to the forum! Indeed, this is technical and uncharted territory as we work to implement this new standard. We look forward to hearing from other forum members on their experiences. To ensure your question gets to the greatest number of your peers, it will be pushed out to the forum membership in our weekly email notification of forum activity on Thursday. Thanks again for visiting!