The following provides guidance on aspects of subsequent measurement for various types of receivables, specifically:
- a
Financial assets subject to prepayment
- b
Standby commitments to purchase
loans - c
Loans and trade receivables not held for sale
- d
Nonmortgage loans held for sale
- e
Loans not previously held for sale
- f
Amortization of discount or premium on notes
- g
Premium allocated to loans purchased in a credit card portfolio
- h
Hedged portfolios of loans
- i
Interest income.
This paragraph applies only to standby commitments to purchase loans. It does not apply to other customary kinds of commitments to purchase loans, nor does it apply to commitments to originate loans. If a standby commitment is recorded at the amount of the option as discussed in paragraph
310-10-25-6,
the liability recorded at the amount of the option premium received (representing the fair value of the standby commitment on the trade date) shall thereafter be accounted for at the greater of the initial standby commitment fee or the fair value of the written put option. Unrealized gains (that is, recoveries of unrealized losses) or losses shall be credited or charged to current operations. However, see Subtopic
815-10 for guidance on accounting for written put options that are within the scope of that Subtopic.
See paragraph
835-30-35-2 for guidance related to amortization of discounts or premiums.
See Subtopic
835-30 for further guidance on situations in which interest shall be imputed.
When an entity purchases a credit card portfolio that includes the cardholder relationships as discussed in paragraph
310-10-25-7,
at an amount that exceeds the sum of the amounts due under the credit card receivables, the premium allocated to the loans shall be amortized over the life of the loans in accordance with Subtopic 310-20. If the credit card agreement provides for a repayment period beyond expiration of the card if the card is not renewed, that period shall be considered in determining the life of the credit card loan. Entities sometimes wish to hedge risk associated with portfolios of loans or specific loan cash flows. See Section
815-20-55 for implementation guidance in such situations.
When recognizing interest income on purchased financial assets with credit deterioration within the scope of Topic 326, an entity shall not recognize as interest income the discount embedded in the purchase price that is attributable to the acquirer's assessment of expected credit losses at the date of acquisition. The entity shall accrete or amortize as interest income the non-credit-related discount or premium of a purchased financial asset with credit deterioration in accordance with existing applicable guidance in Section 310-20-35 or 325-40-35. (P) December 16, 2026; (N) December 16, 2026
326-10-65-7When recognizing interest income on purchased financial assets with credit deteriorationand purchased seasoned loans within the scope of Topic 326, an entity shall not recognize as interest income the discount embedded in the purchase price that is attributable to the acquirer's assessment of expected credit losses at the date of acquisition. The entity shall accrete or amortize as interest income the non-credit-related discount or premium of a purchased financial asset with credit deterioration and a purchased seasoned loan in accordance with existing applicable guidance in Section 310-20-35 or 325-40-35. This Subsection provides the following subsequent measurement guidance:
- a
- b
Changes in initial determination factors
- c
Other matters.
The factors that were evaluated in determining the accounting treatment at inception subsequently change for some acquisition, development, and construction arrangements, for example, as a result of a renegotiation of the terms. Consequently, the accounting treatment for an acquisition, development, and construction arrangement shall be periodically reassessed.
Conversely, if the lender assumes further risks or rewards in an acquisition, development, and construction arrangement by, for example, releasing collateral supporting a guarantee or increasing its percentage of profit participation to over 50 percent, the lender's position may change to that of an investor in real estate.
Neither an improvement in the economic prospects for the project or successful, ongoing development of the project nor a deterioration in the economic prospects for the project justifies a change in classification of an acquisition, development, and construction arrangement.
A change in classification is expected to occur infrequently and shall be supported by appropriate documentation. The change in factors in an acquisition, development, and construction arrangement shall be evaluated based on the guidance in this Subsection and accounted for prospectively.
Regardless of the accounting treatment for an acquisition, development, and construction arrangement, management shall on a continuing basis review the collectibility of uncollected principal, accrued interest, and fees and provide for appropriate allowances.