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PCD Assets: Have you considered the benefits?

Under the new CECL standard, Purchased Credit Deteriorated (PCD) assets replace what was previously classified as Purchased Credit Impaired (PCI) assets. Although this new guidance is complex, it may work in the Bank’s favor as compared to accounting guidance for non-PCD assets. PCD assets are not subject to the infamous “double-count” that Non-PCD assets are subject to. However, Banks must be aware of the regulatory capital implications for both PCD and non-PCD assets under CECL.

In the M&A in a CECL Environment Whitepaper, Valuant provides detailed guidance for how to handle your next acquisition in a CECL world. The whitepaper covers technical guidance from the FASB, key differences in PCI versus PCD assets, an explanation of the PCD Gross-Up process, and considerations for both due diligence and post-acquisition accounting.

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ASC 326 Current Expected Credit Loss (“CECL”) brought many changes to the allowance process but one item remained the same: the need for qualitative factors.

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