what is ecl

ECL stands for Expected Credit Loss. It is a method of accounting for credit risk that is based on the loss that is likely to occur on a loan or portfolio of loans. The Current Expected Credit Losses (CECL) is a credit loss accounting standard that was issued by the Financial Accounting Standards Board on June 16, 2016, which replaces the current Allowance for Loan and Lease Losses (ALLL) accounting standard. The CECL standard focuses on estimation of expected losses over the life of the loans, while the current standard relies on incurred losses. The ECL framework is applied to those assets and any others that are subject to IFRS 9s impairment accounting, a group that includes lease receivables, loan. ECL can be measured either on an individual exposure level or a collective portfolio level (grouped exposures based on shared credit risk characteristics) . The measurement of expected credit losses of a financial instrument should reflect the lifetime ECL, which are the expected credit losses that result from all possible default events over the expected life of the financial instrument.