The CECL model does not apply to AFS debt securities. Instead, the FASB decided to make targeted improvements to the existing OTTI model in ASC 320 for AFS debt securities to eliminate the concept of “other than temporary” from that model. Although the Board originally sought to develop an expected credit losses model that would apply similarly to loans and debt securities, feedback received from stakeholders throughout the model’s development indicated that an entity manages AFS debt securities differently from how it manages other assets measured at amortized cost (e.g., loans and HTM debt securities). Accordingly, in paragraph BC81 of ASU 2016-13, the Board indicates 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.”
Confidential and Proprietary — for Use Solely by Authorized Personnel
This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.