The standard, among other things, requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts, with the objective of presenting an entity’s estimate of the net amount expected to be collected on the financial assets. Under this guidance, entities will use reasonable and supportable forecasts to better inform their credit loss estimates. The standard does not require a specific credit loss method, however; it allows entities to use judgment in determining the relevant information and estimation methods that are appropriate in their circumstances. 

The Q&A document answers some of the more common questions and concerns stakeholders have raised. It clarifies that preparers may use the weighted-average remaining maturity (WARM) method to estimate allowances for credit loss, particularly for less complex financial asset pools, and it goes over when an entity might wish to use this method and how it may do so. It also says that, when implementing current expected credit losses (CECL) using a loss rate method such as WARM, it is acceptable to adjust historical loss information for current conditions and the reasonable and supportable forecasts through a qualitative, versus quantitative, approach.