Don’t You Forget About Me: The Impact of ASU 2016-13 on Debt Securities

Under ASU 2016-13, credit loss measurement differs depending on the debt security’s classification: held-to-maturity (HTM) or available-for-sale (AFS) based on management’s investment intentions. HTM debt securities, will fall under the CECL model of the ASU.   This may potentially require institutions to recognize at adoption and on an ongoing basis, credit losses on certain HTM debt securities which under current guidance would currently have no credit impairment.

In their exploration of accounting for HTM debt securities under CECL, presenters Dobner, Griffin, and Sheller will provide insights on the key challenges unique to measuring HTM debt securities losses and related issues, including:

  • Pooling vs. accounting for individual debt securities
  • Considering the life-of-asset concept for HTM debt securities
  • Determining zero loss securities
  • Estimation of expected lifetime credit loss
  • Possible sources of historic loss information

Presenters will also discuss the impact of ASU 2016-13 on AFS debt securities compared to today’s other than temporary impairment model:

  • What remains the same?
  • What are key differences?

And will cover:

  • Impact of the new purchase credit deteriorated (PCD) for AFS and HTM debt securities

Attendees will leave the presentation well armed with the information they need to account for losses for debt securities under the new CECL standard.

Presenters

Gordon Dobner  |  Partner  |  BKD

A member of BKD National Financial Services Group, Gordon leads the firm’s current expected credit loss (CECL) committee and has been involved in consulting with institutions on education and implementation considerations related to CECL.  He has more than 14 years of experience providing audit and assurance services to public and nonpublic financial institution clients.  Gordon’s experience includes audits of financial statements and internal controls over financial reporting as well assisting in regulatory filings.

John Griffin  |  Managing Director  |  BKD

John is a member of BKD National Financial Services Group as well as the firm’s internal CECL committee.  He has more than 15 years of experience working with financial institutions and entities with total assets ranging from $100 million to more than $50 billion.  Prior to joining BKD, John served as an advisor under the chief accountant for the Southern District of the Office of the Comptroller of the Currency (OCC), an inspector with the Public Company Accounting Oversight Board (PCAOB) and a senior manager at an international accounting firm.

Dale Sheller  |  Vice President  |  The Baker Group

Dale is Vice President in the Financial Strategies Group at The Baker Group. He joined the firm in 2015 after spending six years as a bank examiner with the Federal Deposit Insurance Corporation. Sheller holds a bachelor’s degree in finance and a master’s degree in business administration from Oklahoma State University. He works with clients on interest rate risk management, liquidity risk management, and regulatory issues.