# ASC 326-30-55: Financial Instruments—Credit Losses — Available-for-Sale Debt Securities — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/326/30/#55-implementation-guidance-and-illustrations) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:0d9102574f1bc6eebf34315339e0d8210b1e5b521209ae556d391d3dab126d30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/326/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [326-30-55-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:5ed456e636a65760ecaa8b013cda8684b78585b18ba36331ef28665d5681998c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. There are numerous factors to be considered in determining whether a credit loss exists. The length of time a security has been in an unrealized loss position should not be a factor, by itself or in combination with others, that an entity would use to conclude that a credit loss does not exist. The following list is not meant to be all inclusive. All of the following factors should be considered: 1. a The extent to which the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") is less than the [amortized cost basis](https://asc.understandingaccounting.org/glossary/a/#amortized-cost-basis "The amortized cost basis is the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, writeoffs, foreign exchange, and fair value hedge accounting adjustments.") 2. b Adverse conditions specifically related to the security, an industry, or geographic area; for example, changes in the financial condition of the issuer of the security, or in the case of an asset-backed [debt security](https://asc.understandingaccounting.org/glossary/d/#debt-security "Any security representing a creditor relationship with an entity. The term debt security also includes all of the following: Preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor A collateralized mortgage obligation (or other instrument) that is issued in equity form but is required to be accounted for as a nonequity instrument regardless of how that instrument is classified (that is, whether equity or debt) in the issuer's statement of financial position U.S. Treasury securities U.S. government agency securities Municipal securities Corporate bonds Convertible debt Commercial paper All securitized debt instruments, such as collateralized mortgage obligations and real estate mortgage investment conduits Interest-only and principal-only strips. The term debt security excludes all of the following: Option contracts Financial futures contracts Forward contracts Lease contracts Receivables that do not meet the definition of security and, so, are not debt securities, for example: Trade accounts receivable arising from sales on credit by industrial or commercial entities Loans receivable arising from consumer, commercial, and real estate lending activities of financial institutions."), changes in the financial condition of the underlying [loan](https://asc.understandingaccounting.org/glossary/l/#loan "A contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in the creditor's statement of financial position. Examples include but are not limited to accounts receivable (with terms exceeding one year) and notes receivable.") obligors. Examples of those changes include any of the following: 1. 1 Changes in technology 2. 2 The discontinuance of a segment of the business that may affect the future earnings potential of the issuer or underlying loan obligors of the security 3. 3 Changes in the quality of the credit enhancement. 3. c The payment structure of the debt security (for example, nontraditional loan terms as described in paragraphs [825-10-55-1 through 55-2](https://asc.understandingaccounting.org/asc/825/10/#825-10-55-1) ) and the likelihood of the issuer being able to make payments that increase in the future 4. d Failure of the issuer of the security to make scheduled interest or principal payments 5. e Any changes to the rating of the security by a rating agency. ##### [326-30-55-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:e2859b3217c8f3f425d9243b7f922400acae467593069329fbd2143cfe020194 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should consider available information relevant to the collectibility of the security, including information about past events, current conditions, and reasonable and supportable forecasts, when developing the estimate of cash flows expected to be collected. That information should include all of the following: 1. a The remaining payment terms of the security 2. b Prepayment speeds 3. c The financial condition of the issuer(s) 4. d Expected defaults 5. e The value of any underlying collateral. ##### [326-30-55-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:93b66bd5043f26c97fbcbb8aa7ca223394b07e1ad5a57963cc54685adabae59c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To achieve the objective in paragraph [326-30-55-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-2), the entity should consider, for example, all of the following to the extent they influence the estimate of expected cash flows on a security: 1. a Industry analyst reports and forecasts 2. b Credit ratings 3. c Other market data that are relevant to the collectibility of the security. ##### [326-30-55-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:3a84199edf0a2218c55819a602c1ee4735c7c612f9324413c3b537b67fe56393 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity also should consider how other credit enhancements affect the expected performance of the security, including consideration of the current financial condition of the guarantor of a security (if the guarantee is not a separate contract as discussed in paragraph [326-30-35-5](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-5)), the willingness of the guarantor to pay, and/or whether any subordinated interests are capable of absorbing estimated losses on the loans underlying the security. The remaining payment terms of the security could be significantly different from the payment terms in prior periods (such as for some securities backed by nontraditional loans; see paragraph [825-10-55-1](https://asc.understandingaccounting.org/asc/825/10/#825-10-55-1)). Thus, an entity should consider whether a security backed by currently performing loans will continue to perform when required payments increase in the future (including balloon payments). An entity also should consider how the value of any collateral would affect the expected performance of the security. If the fair value of the collateral has declined, an entity should assess the effect of that decline on its ability to collect the balloon payment. #### Illustrations ##### [326-30-55-5](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:a3812e6dc14b9f57f71a00f8e189b1ed3e0f6420b8e6f4a0b4a41db4e10d157e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may identify purchased financial assets with credit deterioration. ##### [326-30-55-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:a0454041c78f46b74217a0ed3c137742233a935a941e14d53092eaca9fe33b32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A purchases a portfolio of debt securities with varying levels of credit quality that it classifies as available for sale. When determining which individual available-for-sale debt securities should be considered to be in the scope of the guidance for purchased financial assets with credit deterioration, Entity A considers the indicators of impairment in paragraph [326-30-55-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1). Entity A also considers its practices for identifying credit losses on available-for-sale debt securities. If Entity A determines that, on an individual basis, the purchased debt securities are purchased financial assets with credit deterioration, it should classify them as such. ##### [326-30-55-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:3019735dbedbb37dfebf3b49dc8a5920726fdeb3ccbd293d04dfa98dbe686fd4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A also considers the securities that are within the scope of Subtopic 325-40 on beneficial interests in securitized financial assets. Entity A purchases a residual tranche and determines that there is a significant difference between contractual cash flows and expected cash flows. In accordance with paragraph [325-40-30-1A(a)](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A), Entity A applies the accounting for purchased financial assets with credit deterioration to the residual tranche. ##### [326-30-55-8](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:fe32fa7587947b068f91481b4ee17255e0b2b3ccf70645134fda959742a94ac3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 326-30-50The table shows the gross unrealized losses and fair value of Entity B's investments with unrealized losses that are not deemed to have credit losses (in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 20X3. This Example illustrates the application of paragraphs [326-30-50-4 through 50-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) and, in doing so, describes Entity B's rationale for not reporting all or a portion of unrealized losses presented in the table as credit losses. In the application of paragraph [326-30-50-4(b)](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4), Entity B should provide meaningful disclosure about individually significant unrealized losses. To facilitate the narrative disclosures and for simplicity, this Example presents only the quantitative information as of the date of the latest statement of financial position. However, in accordance with paragraphs [326-30-50-4 through 50-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) , that information is required as of each date for which a statement of financial position is presented. - ![](https://asc.understandingaccounting.org/asc-img/GUID-910EEF47-496F-4437-AE6F-42F0AD02466C-low.gif) Less Than 12 Months 12 Months or Greater Total Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury obligations and direct obligations of U.S. government agencies $172 $2 $58 $1 $230 $3 Federal agency mortgage-backed securities 367 5 18 1 385 6 Corporate bonds 150 7 - - 150 7 Marketable equity securities 44 8 - - 44 8 Investments in equity securities carried at cost 20 1 - - 20 1 Total $753 $23 $76 $2 $829 $25 ##### [326-30-55-9](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:24.829Z to 2026-09-09T23:50:24.829Z Record version: sha256:7deed2111b3065d68e82d3f84cbf392dbf4c0696a80eb6a2843451b36724588a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. - U.S. Treasury obligations. The unrealized losses on Entity B's investments in U.S. Treasury obligations and direct obligations of U.S. government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Entity B does not intend to sell the investments and it is not more likely than not that Entity B will be required to sell the investments before recovery of their amortized cost bases. Federal agency mortgage-backed securities. The unrealized losses on Entity B's investment in federal agency mortgage-backed securities were caused by interest rate increases. Entity B purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost bases of Entity B's investments. Entity B does not intend to sell the investments and it is not more likely than not that Entity B will be required to sell the investments before recovery of their amortized cost bases. Corporate bonds. Entity B's unrealized loss on investments in corporate bonds relates to a $150 investment in Entity C's Series C Debentures. Entity C is a manufacturer. The unrealized loss was primarily caused by a recent decrease in profitability and near-term profit forecasts by industry analysts resulting from intense competitive pricing pressure in the manufacturing industry and a recent sector downgrade by several industry analysts. The contractual terms of those investments do not permit Entity C to settle the security at a price less than the amortized cost basis of the investment. While Entity C's credit rating has decreased from A to BBB (Standard & Poor's), Entity B currently does not expect Entity C to settle the debentures at a price less than the amortized cost basis of the investment (that is, Entity B expects to recover the entire amortized cost basis of the security). Entity B does not intend to sell the investment and it is not more likely than not that Entity B will be required to sell the investment before recovery of its amortized cost basis.