The Allowance For Loan Losses

Better Essays

Allowance for Loan Losses The Allowance for Loan Losses (ALL) represents an estimate of losses that have been incurred on loans in the portfolio that are considered to be “impaired” as of the balance sheet date, based in part of review of individual loans and in party on high-level analytics of groups of loans sharing common risk characteristics (“0081_REP_Sacher_interior.indd-243_Sacher_Loan_Losses.pdf,” n.d.). This report will cover the accounting standards of the ALL, the common errors that credit unions make, the challenges that face credit unions today, and the Christian worldview on the ethical side of the ALL accounts.
Accounting Standards Over the past few years the delinquency ratio has increased significantly which has led many credit unions down the road of exceeding the national peer group averages. The ASC states, “ The allowance for credit losses shall be established at a level that is adequate but not excessive to cover probable credit losses related to specifically identified loans as well as probable credit losses inherent in the remainder of the loan portfolio that have been incurred as of the balance-sheet date. Impairment shall not be recognized before it is probable that impairment has occurred, even though it may be probable that impairment will occur in the future. The measurement of credit losses in a portfolio of loans and receivables consists of two parts: reviewing specifically identified loans and estimating credit losses in the remaining

Get Access
Get Access