Allowance for Credit Losses (ACL) Validation

Our validation process helps to ensure institutions maintain alignment with the Allowance for Credit Losses (ACL) 2020 Interagency Policy Statement and relevant Financial Accounting Standards Board guidance, including Accounting Standards Codification (ASC).

We take a comprehensive approach to review the loan loss reserve methodology for both quantitative and qualitative factors. Our procedures incorporate everything from the risk rating process through the effectiveness of internal controls to the reporting to the board of directors. Also included is a review for conformance to regulatory guidelines, a review of loss history, accuracy of the methodology, and reasonableness of reserves. Ultimately, based on the nature and content of the loan portfolio, the work performed will lead to a determination regarding the soundness of the ACL methodology employed.

Our process includes:

  • Documentation of the ALLL methodology and compliance with Policy Statement*
    • ACL policy and reporting
    • Environmental factors
  • Directional consistency with other credit indicators
  • Reconciliation and re-computation of the ACL
  • Documentation
  • Review of historical charge-off rates
  • Reconcile impairment reserves
  • Projected credit losses to actual losses
  • Reporting of the allowance

*2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses


  • Meets regulatory expectations
  • High value proposition
  • Avoids errors in the process
  • Experienced professionals

Download our ACL validation info sheet

How our ACL Validation services have made a difference.


A financial institution was looking for an independent review and assessment of the current ACL process to remain in-line with the organization’s policy and procedures, examiner expectations, and industry best practices.

Enlighten Financial Solution

Enlighten Financial’s ALLL validation process independently assessed the organization’s ACL calculations and processes, ensuring compliance with loan policy, industry best practices, and examiner expectations.