ASC

ASC 325-942

Financial Services—Depository and Lending

325 Investments—Other

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In brief

IntermediateRecognitionSubsequent measurementImpairmentIndustry-specific

This Subtopic gives depository and lending institutions the recognition and measurement rules for four narrow items: Federal Home Loan Bank (FHLB) and Federal Reserve Bank stock, National Credit Union Share Insurance Fund (NCUSIF) deposits and premiums, regular-way securities trades, and exchange memberships. FHLB/Federal Reserve Bank stock is a restricted investment security carried at cost (no readily determinable fair value; redeemable only at $100 par) and tested for impairment based on ultimate recoverability of par, not temporary declines. NCUSIF deposits are assets only so long as they are fully refundable, and regular-way purchases and sales are recorded on the trade date.

Key points (7)
  • Federal Home Loan Bank and Federal Reserve Bank stock shall be classified as a restricted investment security (325-942-25-1), carried at cost and evaluated for impairment under 942-325-35-3 (325-942-35-1).
  • Because FHLB/Federal Reserve Bank stock is redeemable only at its $100 par value and only to the Banks or another member institution, it lacks a readily determinable fair value (325-942-05-2), and it shall not be shown with securities accounted for under Topic 321 (325-942-45-1).
  • Impairment of FHLB stock is assessed on ultimate recoverability of par value rather than temporary declines, considering the decline in the Banks' net assets versus capital stock, required legal/regulatory payment commitments, legislative and regulatory changes affecting the customer base, and the Banks' liquidity position (325-942-35-3).
  • Both cash and stock dividends received on FHLB stock shall be reported as income (325-942-35-2).
  • Regular-way purchases and sales of securities shall be recorded on the trade date, with gains and losses recognized in the statement of operations as of the trade date (325-942-25-2; see 815-10-15-15).
  • For credit unions, NCUSIF deposits are reported as assets only as long as fully refundable (325-942-25-3); refundability is reviewed for impairment considering the financial condition of both the credit union and the Fund, and nonrefundable amounts are charged to expense (325-942-35-4(a)).
  • NCUSIF equity distributions (premium waivers, rebates, or cash) are reported in income in the period it is determined a distribution will be made, and non-waived premiums are expensed in the period to which they relate, or when assessed if levied to cover prior operating losses or restore normal operating levels (325-942-35-4(b)-(c)).

For students. The classic trap is treating FHLB or Federal Reserve Bank stock like an ordinary equity security under Topic 321 — it is not; it stays at cost, is presented separately, and impairment turns solely on whether par will ultimately be recovered, so ordinary fair value declines are ignored. Similarly, NCUSIF deposits are assets only while fully refundable, not automatically.

federal home loan bank stockrestricted investment securitycost method carrying amountultimate recoverability of par valuetrade-date accountingregular-way security tradesncusif deposits and premiumsexchange memberships

Machine-generated study aid for ASC 325-942. Check the source paragraphs below.

325-942-00Status

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325-942-05Overview and Background

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325-942-05-1
This Subtopic provides recognition and measurement guidance concerning Federal Home Loan Bank or Federal Reserve Bank stock, National Credit Union Share Insurance Fund deposits and premiums, regular-way securities, and exchange memberships.
325-942-05-2
Although Federal Home Loan Bank (or Federal Reserve Bank) stock is an equity interest in a Federal Home Loan Bank (or Federal Reserve Bank), it does not have a readily determinable fair value because its ownership is restricted and it lacks a market. Federal Home Loan Bank (or Federal Reserve Bank) stock can be sold back only at its par value of $100 per share and only to the Federal Home Loan Banks (or Federal Reserve Banks) or to another member institution. In addition, the equity ownership rights represented by Federal Home Loan Bank stock are more limited than would be the case for a public company, because of the oversight role exercised by regulators in the process of budgeting and approving dividends.

325-942-15Scope and Scope Exceptions

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Overall Guidance

325-942-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 942-10-15.

325-942-25Recognition

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Federal Home Loan Bank or Federal Reserve Bank Stock

325-942-25-1
Federal Home Loan Bank and Federal Reserve Bank stock shall be classified as a restricted investment security.

Regular-Way Securities

325-942-25-2
Regular-way purchases and sales of securities shall be recorded on the trade date. Gains and losses from regular-way security sales or disposals shall be recognized as of the trade date in the statement of operations for the period in which securities are sold or otherwise disposed of. See paragraph 815-10-15-15 for a definition of regular-way security trades.

National Credit Union Share Insurance Fund Deposits

325-942-25-3
For credit unions and corporate credit unions, amounts deposited with the National Credit Union Share Insurance Fund shall be accounted for and reported as assets as long as such amounts are fully refundable.

Exchange Memberships

325-942-25-4
Section 940-340-25 provides guidance for recognition of exchange memberships.

325-942-30Initial Measurement

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Exchange Memberships

325-942-30-1
Section 940-340-30 provides guidance for initial measurement of exchange memberships.

325-942-35Subsequent Measurement

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Federal Home Loan Bank or Federal Reserve Bank Stock

325-942-35-1
Federal Home Loan Bank and Federal Reserve Bank stock shall be carried at cost and evaluated for impairment in accordance with paragraph 942-325-35-3.
325-942-35-2
Both cash and stock dividends received on Federal Home Loan Bank stock shall be reported as income. See Topics 505 and 852 for guidance concerning stock splits.
325-942-35-3
Federal Home Loan Bank stock is generally viewed as a long-term investment. Accordingly, when evaluating Federal Home Loan Bank stock for impairment, its value shall be determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The determination of whether the decline affects the ultimate recoverability is influenced by criteria such as the following:
  1. a
    The significance of the decline in net assets of the Federal Home Loan Banks as compared to the capital stock amount for the Federal Home Loan Banks and the length of time this situation has persisted
  2. b
    Commitments by the Federal Home Loan Banks to make payments required by law or regulation and the level of such payments in relation to the operating performance of the Federal Home Loan Banks
  3. c
    The impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the Federal Home Loan Banks
  4. d
    The liquidity position of the Federal Home Loan Banks.

National Credit Union Share Insurance Fund Deposits and Premiums

325-942-35-4
Credit unions and corporate credit unions are subject to all of the following recognition and measurement provisions:
  1. a
    The refundability of National Credit Union Share Insurance Fund deposits shall be reviewed for impairment. When the refundability of a deposit is evaluated, the financial condition of both the credit union and of the National Credit Union Share Insurance Fund shall be considered. Deposits may be returned to solvent credit unions for a number of reasons, including termination of insurance coverage, conversion to insurance coverage from another source, or transfer of operations of the insurance fund from the National Credit Union Administration Board. However, insolvent or bankrupt credit unions shall not be entitled to a return of their deposits. To the extent that National Credit Union Share Insurance Fund deposits are not refundable, they shall be charged to expense in the period in which the deposits are made or the assets become impaired.
  2. b
    In years in which the equity of the National Credit Union Share Insurance Fund exceeds normal operating levels, the National Credit Union Administration is required to make distributions to insured credit unions to reduce the equity of the National Credit Union Share Insurance Fund to normal operating levels. Such distributions may be in the form of a waiver of insurance premiums, premium rebates, or cash payments. Distributions in connection with that reduction in the equity of the National Credit Union Share Insurance Fund shall be reported in the income statement in the period in which it is determined that a distribution will be made.
  3. c
    The system of savings account insurance established by the recapitalization of the National Credit Union Share Insurance Fund, which provided for reserves of 1 percent of insured deposits, is based on the concept that the required deposits create a fund with an earning potential sufficient to provide for the risk of losses in the credit union system. In years in which the earnings of the fund have been adequate to provide insurance protection and cover all expenses and losses incurred by the fund, the National Credit Union Administration Board has elected to waive the insurance premiums due from insured credit unions. In those years, it has been industry practice to net imputed earnings on the insurance deposits against imputed premium expense rather than present them as gross amounts on the statement of income. In years in which the insurance premiums are not waived by the National Credit Union Administration, the premiums shall be expensed in the period to which they relate. To the extent that the National Credit Union Administration assesses premiums to cover prior operating losses of the insurance fund or to increase the fund balance to normal operating levels, credit unions shall expense those premiums when assessed.

Exchange Memberships

325-942-35-5
Section 940-340-35 provides guidance for subsequent measurement of exchange memberships.

325-942-45Other Presentation Matters

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Federal Home Loan Bank or Federal Reserve Bank Stock

325-942-45-1
Investments in Federal Home Loan Bank or Federal Reserve Bank stock shall not be shown with securities accounted for under Topic 321.

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