Date of Award


Degree Type


Degree Name

Master of Science (MS)


Applied Economics

Committee Chair(s)

Ryan Larsen (Committee Chair)


Ryan Larsen


Dillon Feuz


Ryan Bosworth


The purpose of this paper is to implement the Current Expected Credit Losses (CECL) methodology for an Association of the Farm Credit System (FCS). CECL was released in 2016 by the Financial Accounting Standards Board (FASB) and is expected to be implemented by all banks and lending institutions starting Jan. 1, 2023. CECL changes the way lenders account for Allowance for Loan and Lease Losses (ALLL) by allocating a small amount of allowance for loan loss for each loan at origination. The association for which this project was designed provided historical loan data for 21,755 loans which tracked probability of default (PD) migrations from November 2000 to February 2019. The data was sorted by loan type and original maturity. Seven segments were identified based on loan type and average life of loan. Using monthly PD migrations, the segments were multiplied by a 12-month factor provided by the FCS administrator which resulted in the PD factor for that particular PD and segment. The PD factor was multiplied by an LGD factor and the amortized principal balance for the designated segment of that loan to calculate how much allowance should be allocated for each loan. Using the provided data and formula, the Allowance for Loan and Lease Loss was reduced by 36.9% by using the CECL method.

Available for download on Thursday, August 13, 2026