30 model selection and development. Documenting the steps from planning to model selection will support the conclusions made as organizations move into the model finalization and post-implementation period. The following are examples of key phases and items to document in the post-planning phase as institutions move from model selection into finalization and beyond: Model Finalization • Conclusions on parallel run results including reasonableness of output, review processes, and benchmarking • Description of model adjustments made and appropriateness Policies, Procedures, & Controls • Listings of policies updated and reviewed • Discussion of IT processes impacted (user access, change management, etc.) • New controls related to CECL and corresponding control owners Disclosures & Call Report • Review process of related CECL disclosures, including reviewer sign-offs and dates • Documentation dates and descriptions of discussions surrounding GAAP disclosure changes • Call report changes including phase-in capital plan Although this list is not comprehensive, it includes key items that can help build a strong foundation for CECL documentation. Continued from page 29 How to Document? Management’s goal for CECL documentation should be to describe the process of going from segmentation and data analysis to the model selection; while documenting the key inputs, assumptions, and decision points. This documentation can take various forms but, ultimately, the key is to make it clear, organized, and thorough. Some common formats include descriptive narratives, internal memos, and policies and procedures. In addition, it is important to create regular documentation checkpoints (whether biweekly, weekly, etc.) to update documentation as you proceed through the CECL implementation process. Documentation should describe how each point in the CECL road map, correlates back to the accounting standard. Management decisions should be clearly outlined and include detail on why those decisions are appropriate and how they influence the model. When data is unavailable or qualitative decisions are made, documentation should note associated assumptions and considerations of materiality. This information will support management’s conclusions at the end of implementation and allow for a more complete and accurate documentation of the process. Conclusion Financial institutions should invest the time and resources to document the thought process, decisions, and rationale for CECL implementation. This documentation will allow institutions to justify the appropriateness and relevancy of decisions made, enhance institutional understanding of allowance calculations, and better prepare organizations to meet the requirements of regulators and auditors. Documentation should describe how each point in the CECL road map, correlates back to the accounting standard. Management decisions should be clearly outlined and include detail on why those decisions are appropriate and how they influence the model.
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