In the first quarter of 2020, accounting teams were getting their first taste of a newly effective major accounting change: The new Current Expected Credit Loss (CECL) model, which requires immediate recognition of management estimates of CECL for assets held at amortized cost.
The timing also happened to be when the COVID-19 pandemic took hold.
Accounting teams were sent to work from home at the same time the market turned volatile amidst the uncertainty surrounding the virus. It’s safe to say investment accountants had a lot on their minds and plates during this time.
Prepared for Change with the Right Technology
Partnering with Clearwater as their investment accounting and reporting solution proved to be an advantage for teams during this time.
Prior to the new accounting change going into effect, Clearwater made key changes to the system to provide users with the tools necessary to handle CECL updates. These changes included general ledger updates and new reports, plus thorough documentation, training, and support from Clearwater’s client servicing team and accounting experts.
What did that mean for Clearwater users in early 2020? Here’s a summary of one client’s experience navigating CECL with Clearwater.
A Client Case Study
This Clearwater user, an insurer, knew they had to begin applying CECL for the quarter starting January 1, 2020. They worked to put a plan in place and get their processes aligned prior to the start date. As part of that planning, the insurer worked with their Clearwater client services team to set up their CECL reports and configure the reports to meet their needs.
Once the pandemic hit, the investment accounting team moved to a work-from-home model. It was also at this time that daily portfolio monitoring became critical.
A Critical Tool, Every Day
Each day, the accounting team would log in to Clearwater first thing in the morning to run their CECL reports. They had access to updated portfolio information when they needed it, and all had access to the same data even from their separate home offices. It was essential for the team to start their day with the data so they could immediately dive into analysis. The accounting team needed this information so they could work with the investment management team to determine what they might need to sell, what was recovering, and what else they needed to monitor.
The accountants were also fielding daily questions from the VP of investments, CEO, CFO, and investment committee who all were concerned about the insurer’s bottom line through this period of volatility and uncertainty. With Clearwater, they could provide confident, timely answers of where the company stood.
Thanks to this active, daily portfolio monitoring and helpful tools and reports for CECL, the accounting team had a clear plan in place by quarter-end for what they were going to write down through a CECL allowance, what they would sell, and what they would continue watching.
Learn More About Our Solution and Services
Do you feel confident in the quality and timeliness of your investment data? Schedule a meeting with a Clearwater solutions consultant today for an evaluation of your investment accounting and reporting processes.
Learn more about navigating CECL and how Clearwater can help by downloading our CECL eGuide.