ASC

ASC 320-942

Financial Services—Depository and Lending

320 Investments—Debt Securities

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In brief

IntermediateDisclosureFinancial instrumentsIndustry-specificSubsequent measurement

This industry Subtopic supplements ASC 320-10 for depository and financial institutions (banks, thrifts, savings banks, credit unions, finance companies, insurance entities), addressing how they measure and disclose investments in debt and equity securities. Its core content is disclosure: securities must be broken out by prescribed major security types and by at least four maturity groupings, collateral pledged must be disclosed, and the accounting policy (including basis for classification) explained. It also confirms that amortization or accretion of debt securities generally runs from the purchase date to maturity, and that bank regulators' general divestiture authority does not by itself defeat held-to-maturity classification.

Key points (7)
  • The period of amortization or accretion for debt securities generally extends from the purchase date to the maturity date unless other Topics apply (320-942-35-1).
  • For purposes of the ASC 320-10-50-1 through 50-3 and 50-5 through 50-5C disclosures, 'financial institutions' includes banks, savings and loan associations, savings banks, credit unions, finance companies, and insurance entities (320-942-50-1).
  • Disclosures must present prescribed major security types—equity securities segregated by industry type, entity size, or investment objective; U.S. Treasury/agency, state and political subdivision, foreign government, and corporate debt; residential and commercial mortgage-backed securities; collateralized debt obligations; and other debt obligations (320-942-50-2).
  • Mutual funds that invest only in U.S. government debt securities may be shown separately rather than grouped with other equity securities (320-942-50-2A).
  • The net carrying amount of debt securities must be disclosed in at least four maturity groupings (within 1 year, 1–5 years, 5–10 years, after 10 years), with securities lacking a single maturity date (e.g., mortgage-backed securities) either shown separately or allocated with the basis of allocation disclosed (320-942-50-3); public business entities must also disclose fair value by the same groupings (320-942-50-3A).
  • The carrying amount of investment assets pledged as collateral for public funds, repurchase agreements, and other borrowings, if not otherwise disclosed under Topic 860, must be disclosed in the notes, and the notes must explain the institution's securities accounting policy including the basis for classification (320-942-50-4; 320-942-50-5).
  • A regulator's general authority to require divestiture is not an automatic impairment of the ability to hold a security to maturity, though specific facts and circumstances may indicate the institution lacks that ability (320-942-55-1; 320-942-55-2).

For students. This is where bank and insurance securities-portfolio footnote disclosures come from—expect questions on the four maturity buckets and the required major security types. A common misunderstanding is that regulators' power to force a sale destroys held-to-maturity intent; 320-942-55-1 says the general authority alone does not, only specific facts and circumstances can.

major security typesmaturity groupings disclosureheld-to-maturity classificationamortization and accretion periodpledged collateral disclosurefinancial institutionsmortgage-backed securitiesregulator divestiture authority

Machine-generated study aid for ASC 320-942. Check the source paragraphs below.

320-942-00Status

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320-942-05Overview and Background

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320-942-05-1
This Subtopic provides guidance regarding the recognition, measurement and disclosure of debt and equity securities by financial institutions.

320-942-15Scope and Scope Exceptions

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Overall Guidance

320-942-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 942-10-15.

320-942-35Subsequent Measurement

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Amortization or Accretion Period

320-942-35-1
The period of amortization or accretion for debt securities shall generally extend from the purchase date to the maturity date, unless other Topics are applicable.

320-942-50Disclosure

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320-942-50-1
For purposes of the disclosure requirements of paragraphs
320-10-50-1 through 50-3
and 320-10-50-5 through 50-5C, the term financial institutions includes banks, savings and loan associations, savings banks, credit unions, finance companies, and insurance entities.
320-942-50-1A
The disclosures in paragraphs
942-320-50-1 through 50-3
are required for interim and annual periods.
320-942-50-2
In complying with the requirements in paragraph 942-320-50-1, financial institutions shall include in their disclosure all of the following major security types, although additional types also may be necessary:
  1. a
    Equity securities, segregated by any one of the following:
    1. 1
      Industry type
    2. 2
      Entity size
    3. 3
      Investment objective.
  2. b
    Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies
  3. c
    Debt securities issued by states of the United States and political subdivisions of the states
  4. d
    Debt securities issued by foreign governments
  5. e
    Corporate debt securities
  6. f
    Residential mortgage-backed securities
  7. ff
    Commercial mortgage-backed securities
  8. fff
    Collateralized debt obligations
  9. g
    Other debt obligations.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1In complying with the requirements in paragraph 942-320-50-1, financial institutions shall include in their disclosure in interim and annual reporting periods all of the following major security types, although additional types also may be necessary:
  1. a
    Equity securities, segregated by any one of the following:
    1. 1
      Industry type
    2. 2
      Entity size
    3. 3
      Investment objective.
  2. b
    Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies
  3. c
    Debt securities issued by states of the United States and political subdivisions of the states
  4. d
    Debt securities issued by foreign governments
  5. e
    Corporate debt securities
  6. f
    Residential mortgage-backed securities
  7. ff
    Commercial mortgage-backed securities
  8. fff
    Collateralized debt obligations
  9. g
    Other debt obligations.
320-942-50-2A
Investments in mutual funds that invest only in U.S. government debt securities may be shown separately rather than grouped with other equity securities in the disclosures by major security type required by paragraph 942-320-50-2.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, investments in mutual funds that invest only in U.S. government debt securities may be shown separately rather than grouped with other equity securities in the disclosures by major security type required by paragraph 942-320-50-2.
320-942-50-3
In complying with this requirement, financial institutions shall disclose the net carrying amount of debt securities based on at least 4 maturity groupings:
  1. a
    Within 1 year
  2. b
    After 1 year through 5 years
  3. c
    After 5 years through 10 years
  4. d
    After 10 years.
Securities not due at a single maturity date, such as mortgage-backed securities, may be disclosed separately rather than allocated over several maturity groupings. If allocated, the basis for allocation also shall be disclosed.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1In complying with this requirement, financial institutions shall disclose the net carrying amount of debt securities in interim and annual reporting periods based on at least 4 maturity groupings:
  1. a
    Within 1 year
  2. b
    After 1 year through 5 years
  3. c
    After 5 years through 10 years
  4. d
    After 10 years.
Securities not due at a single maturity date, such as mortgage-backed securities, may be disclosed separately rather than allocated over several maturity groupings. If allocated, the basis for allocation also shall be disclosed.
320-942-50-3A
A financial institution that is a public business entity shall disclose the fair value of the debt securities based on at least 4 maturity groupings:
  1. a
    Within 1 year
  2. b
    After 1 year through 5 years
  3. c
    After 5 years through 10 years
  4. d
    After 10 years.
Securities not due at a single maturity date, such as mortgage-backed securities, may be disclosed separately rather than allocated over several maturity groupings. If allocated, the basis for allocation also shall be disclosed.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1A financial institution that is a public business entity shall disclose the fair value of the debt securities in interim and annual reporting periods based on at least 4 maturity groupings:
  1. a
    Within 1 year
  2. b
    After 1 year through 5 years
  3. c
    After 5 years through 10 years
  4. d
    After 10 years.
Securities not due at a single maturity date, such as mortgage-backed securities, may be disclosed separately rather than allocated over several maturity groupings. If allocated, the basis for allocation also shall be disclosed.

Other Securities

320-942-50-4
The carrying amount of investment assets that serve as collateral to secure public funds, securities sold under repurchase agreements, and other borrowings, that are not otherwise disclosed under Topic 860, shall be disclosed in the notes to financial statements.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, the carrying amount of investment assets that serve as collateral to secure public funds, securities sold under repurchase agreements, and other borrowings, that are not otherwise disclosed under Topic 860, shall be disclosed in the notes to financial statements.
320-942-50-5
The notes to financial statements shall include an explanation of the institution's accounting policy for securities, including the basis for classification.

320-942-55Implementation Guidance and Illustrations

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Financial Institutions' Ability to Hold Mortgage Securities to Maturity

320-942-55-1
Regulators of financial institutions can, under appropriate circumstances, conclude that the continued ownership of any asset represents an undue safety and soundness risk to an institution and, accordingly, require the divestiture of that asset. It was not intended that a regulator's overall divestiture authority be considered as an automatic impairment of an institution's ability to hold any security to maturity, since impairment would have precluded any use of the held-to-maturity category by regulated financial institutions. However, specific facts and circumstances could indicate that an institution does not have the ability to hold a security to maturity.
320-942-55-2
The federal regulatory agencies note that only in rare circumstances have examiners required a financial institution to dispose of mortgage securities that have become high-risk after acquisition. Such circumstances have occurred only when examiners have determined that there is a significant safety and soundness concern with respect to a particular institution that has arisen from its holdings of these assets. The agencies note that examiners' divestiture authority is not unique to high-risk mortgage securities but rather is the same authority they have with respect to any other security or asset. Thus, the mere existence of examiners' divestiture authority for high-risk mortgage securities should not preclude an institution from concluding it has the intent and ability to hold to maturity those securities that were non-high-risk when acquired.
320-942-55-3
See paragraphs
948-310-25-1 through 25-2
, 948-310-30-4, and
948-310-35-4 through 35-5
for additional guidance concerning mortgage loans held as long-term investments.

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