Handbook: Credit impairment
Handbook | July 2026
Latest edition: Our updated guide to the accounting, presentation and disclosures of CECL
Using Q&As and examples, our in-depth guide explains the accounting under ASC 326. This 2026 edition has been updated to include ASU 2025-05 and ASU 2025-08, as well as our latest interpretations based on questions we experience in practice.
Applicability
- Companies that hold financial instruments in the scope of the credit losses standard
Relevant dates
- Effective immediately
Key impacts
ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASC 326), was the culmination of a project that began in the wake of the global financial crisis. This standard marked a significant change – requiring the immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Since issuance, the FASB has collected feedback on the standard; as a result, it has issued various ASUs to amend ASC 326. These include ASUs issued in 2025 that are intended to simplify ASC 326’s application for certain assets and to improve consistency of financial reporting for purchased assets.
ASC 326 is particularly impactful for institutions with significant lending activities or investments in debt securities, although it applies to all entities with financial assets. The standard does not prescribe all aspects of the expected credit loss estimate, including the specific method used, thereby providing flexibility for companies to formulate their own approaches to reflect their estimate of expected credit losses.
Our purpose with this Handbook is to help you understand and successfully apply ASC 326. Changes in business practices and the economic environment continue to create new challenges. We intend to continue the dialogue – updating this publication to provide our insights on issues that arise.
Report Contents
ASC 326-20
- Scope
- Recognition of expected credit losses, write-offs and recoveries
- Methods to estimate expected credit losses and collective assessment
- Contractual term
- Historical loss experience, forecasts and reversion
- No allowance for credit losses
- Credit enhancements
- Practical expedients and simplifications
- Purchased financial assets
- Business combinations and asset acquisitions
- Off-balance sheet credit exposures
- Guarantees
- Other investments in equity method investees
- Net investment in leases
- Specific considerations for insurance entities, commercial entities and trade receivables
ASC 326-30
- Available-for-sale debt securities
Relevant to ASC 326-20 and 326-30
- Beneficial interests
- Subsequent events
- Presentation and disclosure
- Effective dates and transition
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