A Critical Analysis of Calculations of Current Expected Credit Losses (CECL) at Dynamic Corporation

ABSTRACT In 2016, the Financial Accounting Standards Board (FASB) issued a standards update on current expected credit losses (Accounting Standards Update 2016-13; FASB Codification® Topic 326). While the update does not change the debits and credits associated with current expected credit losses (CECL), it does significantly change the calculations associated with estimates of current expected credit losses. Additionally, given that most textbooks simply provide inputs for the calculations associated with estimates of current expected credit losses, most accounting curricula do not cover the most important changes found in the update. This case provides students with a hypothetical situation in which to analyze and understand these issues. Specifically, the case requires students to critically analyze a series of current expected credit loss calculations, research authoritative guidance, and conclude regarding the appropriateness of the calculations of the actors in the case. Results indicate that students perceive significant practical learning opportunities from the case.