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- Title
Accounting Standards Codification 326.
- Authors
McCarthy, Mark; Schneider, Douglas K.
- Abstract
This article explores the implementation and impact of Accounting Standards Codification (ASC) 326, which was introduced after the 2008 financial crisis. ASC 326 requires financial institutions to estimate and record future credit losses using an "expected loss" approach. The article examines the trends in loss recognition over the past three years and evaluates the effectiveness of ASC 326. It also provides background information on the causes of the financial crisis and the role of entities like Fannie Mae and Freddie Mac. The article concludes by analyzing the reported provision for credit losses (PCL) of ten large financial institutions before and after the implementation of ASC 326. The article highlights concerns raised in the financial community regarding the usefulness of the information provided and suggests that future expectations for financial reporting by banks include reporting PCL as a loss in most years and reducing volatility across reporting periods. The article includes three exhibits that display the PCL reported by various financial institutions from 2018 to 2022, obtained from their annual reports, quarterly reports, 10-Q, or 10-K.
- Subjects
MORTGAGE-backed securities; CITIGROUP Inc.; J.P. Morgan Chase &; Co.; CAPITAL One Financial Corp.; ACCOUNTING standards; FINANCIAL crises; BANKING industry; LOAN loss reserves; LOANS; HOME prices; HOME ownership
- Publication
CPA Journal, 2024, Vol 94, Issue 1/2, p50
- ISSN
0732-8435
- Publication type
Article