7.1 Introduction
The CECL model does not apply to AFS debt securities. The FASB discusses
its basis for a distinct model in paragraph BC81 of ASU 2016-13, which states that “the same
credit loss model cannot apply because there are different measurement attributes. The
measurement attribute for available-for-sale debt securities necessitates a separate
credit loss model because an entity may realize the total value of the securities either
through collection of contractual cash flows or through sales of the securities.”
The decision tree below illustrates how an entity identifies and
assesses impairment on AFS debt securities.