The Decision Usefulness of CECL : Users’ Views about the Current Expected Credit Losses Model

In 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update, ASU, 2016-13. Financial Instruments - Credit Losses, requiring firms to switch to a current expected credit losses (CECL) model. To assess the impact of this new standard, we performed semi-structured interviews with 13 individuals, comprised of analysts, trade group members, and financial journalists, all of whom have knowledge of and experience with CECL. Overall, interviewees shared the view that the CECL standard-setting process was tumultuous and political and that CECL led to perceptions of decreased decision usefulness of loan loss information, decreased comparability between reporting firms, and insignificant operational impact. Interviewees suggested increased and more consistent disclosures to improve comparability across issuers and the decision usefulness of information reported under CECL. Our study answers the call from FASB to perform research into the impacts of CECL and also contributes to the literature on sell-side analyst decision making (e.g. Brown et al. 2015) and the literature on the determinants of decision usefulness for analysts (e.g. Campbell and Slack 2011)