ASC 326 (CECL) requires an expected-credit-loss allowance on financial assets — including ordinary trade receivables. This tool helps you build a structured, documentable estimate.
What this tool does
You enter your receivable or loan pool and loss history; it applies a loss-rate method and lets you layer a reasonable-and-supportable forward-looking adjustment.
Who it's for
Controllers at companies with material receivables or loans that need a CECL allowance and the memo behind it.
How to use it — step by step
- Segment your pool. Group receivables/loans with similar risk (aging bucket, customer type).
- Enter historical loss rates. Your own write-off experience by segment.
- Add a forward-looking overlay. Adjust for current and expected conditions, and document why.
- Document the estimate. The number is only as good as the memo behind it.
How to read your result
CECL is judgment plus documentation. The output is a starting estimate — the defensibility comes from segmentation logic and a written rationale for the forward-looking overlay.
Worked examples
The same tool behaves differently depending on what you put in. Here are 3 situations.
Trade receivables by aging
Inputs: Aging buckets with historical write-off rates.
What the tool shows: Applies loss rates by bucket to produce a pooled allowance.
What to do: Document why each bucket's rate is reasonable.
Small loan/note portfolio
Inputs: A handful of notes with loss history.
What the tool shows: Builds an expected-loss estimate and highlights concentration risk.
What to do: Consider specific reserves for troubled notes.
Deteriorating macro outlook
Inputs: You expect conditions to worsen.
What the tool shows: Lets you layer a forward-looking increase over historical rates.
What to do: Write the memo tying the overlay to specific expected conditions.
Common questions
Does CECL apply to trade receivables? Yes — even simple AR needs a CECL allowance under ASC 326.
Is the output audit-ready? It's a structured estimate; your documentation makes it audit-ready.
Does this replace judgment? No — CECL is inherently judgmental; verify with your auditor.