A report from Moody’s Analytics explains the new credit impairment model, known as the current expected credit loss model (CECL), for the recognition and measurement of credit losses for loans and debt securities The CECL is in the FASB’s recently released accounting standards update for credit losses (ASU No. 2016-13).

Huge change: Financial statements will have to show credit losses on loans and other financial instruments in a more timely fashion under the new standard. “This new standard is far more than an exercise in financial accounting and bank regulation,” says the Moody’s report. “It will replace the current incurred loss model with an expected loss model, one of the most significant changes in the history of bank accounting.”