At each reporting date, an entity shall record an allowance for credit losses on financial assets (including purchased financial assets with credit deterioration) within the scope of this Subtopic. An entity shall compare its current estimate of expected credit losses with the estimate of expected credit losses previously recorded. An entity shall report in net income (as a credit loss expense or a reversal of credit loss expense) the amount necessary to adjust the allowance for credit losses for management's current estimate of expected credit losses on financial asset(s). The method applied to initially measure expected credit losses for the assets included in paragraph 326-20-30-14 generally would be applied consistently over time and shall faithfully estimate expected credit losses for financial asset(s). (P) December 16, 2026; (N) December 16, 2026
326-10-65-7At each reporting date, an entity shall record an allowance for credit losses on financial assets (including purchased financial assets with credit deteriorationand purchased seasoned loans) within the scope of this Subtopic. An entity shall compare its current estimate of expected credit losses with the estimate of expected credit losses previously recorded. An entity shall report in net income (as a credit loss expense or a reversal of credit loss expense) the amount necessary to adjust the allowance for credit losses for management's current estimate of expected credit losses on financial asset(s). Except for purchased seasoned loans that are subject to the guidance in paragraph 326-20-35-1B, the method applied to initially measure expected credit losses for the assets included in paragraph 326-20-30-14 generally would be applied consistently over time and shall faithfully estimate expected credit losses for financial asset(s).(P) December 16, 2026; (N) December 16, 2026
326-10-65-7If an entity estimates expected credit losses on purchased seasoned loans using a method other than a discounted cash flow method described in paragraph 326-20-30-4, the entity may elect to measure an allowance for credit losses on purchased seasoned loans using the amortized cost basis and apply the guidance in paragraph 326-20-30-2 as of each balance sheet date after the acquisition date. An entity shall elect this option on an acquisition-by-acquisition basis in the period that the acquisition occurs and apply it to all purchased seasoned loans recognized in that acquisition. The effect of electing this option shall be recorded in net income as a credit loss expense.(P) December 16, 2026; (N) December 16, 2026
326-10-65-7If an entity elects the option in paragraph 326-20-35-1A, the initial amortized cost basis measured in accordance with paragraph 326-20-30-13 and effective interest rate measured in accordance with paragraph 310-10-35-53B as of the acquisition date shall not be remeasured in connection with electing this option. In addition, expected credit losses shall be measured consistently for the remaining life of the purchased seasoned loans.An entity shall evaluate whether a financial asset in a pool continues to exhibit similar risk characteristics with other financial assets in the pool. For example, there may be changes in credit risk, borrower circumstances, recognition of writeoffs, or cash collections that have been fully applied to principal on the basis of nonaccrual practices that may require a reevaluation to determine if the asset has migrated to have similar risk characteristics with assets in another pool, or if the credit loss measurement of the asset should be performed individually because the asset no longer has similar risk characteristics.
An entity shall adjust at each reporting period its estimate of expected credit losses on off-balance-sheet credit exposures. An entity shall report in net income (as credit loss expense or a reversal of credit loss expense) the amount necessary to adjust the liability for credit losses for management's current estimate of expected credit losses on off-balance-sheet credit exposures at each reporting date.
An entity may make an accounting policy election, at the class of financing receivable or the major security-type level, to write off accrued interest receivables by reversing interest income or recognizing credit loss expense or a combination of both. This accounting policy election should be considered separately from the accounting policy election in paragraph 326-20-30-5A. An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. (P) December 16, 2026; (N) December 16, 2026
105-10-65-10An entity may make an accounting policy election, at the class of financing receivable or the major security-type level, to write off accrued interest receivables by reversing interest income or recognizing credit loss expense or a combination of both. This accounting policy election should be considered separately from the accounting policy election in paragraph 326-20-30-5A. An entity may not analogize this guidance to components of amortized cost basis other than accrued interest.This Subtopic does not address how a creditor shall recognize interest income. See paragraphs for guidance on recognition of interest income on purchased financial assets with credit deterioration. See paragraph 326-20-45-3 for presentation guidance. (P) December 16, 2026; (N) December 16, 2026
326-10-65-7| Editor's Note: The content of paragraph 326-20-35-10 will change upon transition, together with a change in the heading noted below. |
| > Interest Income on Purchased Financial Assets with Credit Deterioration and Purchased Seasoned Loans |
This Subtopic does not address how a creditor shall recognize interest income. See paragraphs for guidance on recognition of interest income on purchased financial assets with credit deteriorationand purchased seasoned loans. See paragraph 310-10-35-53C for additional guidance on recognition of interest income on purchased financial assets with credit deterioration. See paragraph 326-20-45-3 for presentation guidance.