# ASC Topic 326: Financial Instruments—Credit Losses Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/326/) 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): 2026-09-09T23:48:58.995Z to 2026-09-09T23:50:26.688Z Record version: sha256:24b10648af4867b773f4a41b494acdb826e3dc2f389b5852599ad2b48440e746 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## Machine-generated topic summary ASC 326 (Credit Losses) tells an entity how to measure expected credit losses on financial instruments through three subtopics: 326-10 Overall (purpose, scope for all entities, and the Section 65 transition/effective-date guidance, including ASU 2025-05 on accounts receivable and contract assets and ASU 2025-08 on purchased loans), 326-20 the CECL model for assets measured at amortized cost, and 326-30 impairment of available-for-sale debt securities. Under 326-20, an entity records at each reporting date an allowance—a valuation account deducted from amortized cost—equal to all credit losses expected over the contractual term, estimated on a pool basis when assets share similar risk characteristics, using historical loss experience adjusted for current conditions and reasonable and supportable forecasts with reversion to historical information thereafter (326-20-30-1, 30-2, 30-6, 30-8 through 30-9). Under 326-30, impairment is instead assessed security by security: the credit portion of a decline below amortized cost (present value of expected cash flows discounted at the effective interest rate versus amortized cost) is recorded as an allowance capped at the fair value shortfall, the rest goes to OCI, and an intent or likely requirement to sell triggers a write-down to fair value through earnings (326-30-35-1, 35-6, 35-10). The unifying idea is that credit losses are recognized currently and forward-lookingly through an allowance that presents the net amount expected to be collected, rather than only when losses are incurred. Source downloaded (UTC): 2026-09-09T23:48:58.995Z to 2026-09-09T23:49:14.132Z Record version: sha256:d35495ceaae991860c574df8967fd3cffc5713f41369fef70cdbfe75b1c81c67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-10: Financial Instruments—Credit Losses — Overall ### Machine-generated study aids ```json { "summary": "ASC 326-10 is the Overall subtopic of the credit losses Topic: it states the Topic's purpose (how an entity measures credit losses on financial instruments), identifies its three subtopics (Overall; Measured at Amortized Cost; Available-for-Sale Debt Securities), and applies to all entities. Its substantive content today is largely scope plus the transition/effective-date paragraphs in Section 65 for recent ASUs, since the CECL-adoption transition paragraphs from ASU 2016-13 and related updates were superseded on 06/21/2024 once the transition period ended.", "key_points": [ "Topic 326 provides guidance on how an entity should measure credit losses on financial instruments and comprises the Overall, Amortized Cost, and Available-for-Sale Debt Securities subtopics (326-10-05-1; 326-10-05-2).", "The guidance in Subtopic 326-10 applies to all entities (326-10-15-1).", "The original CECL transition paragraphs tied to ASUs 2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-03, and 2022-02 were superseded on 06/21/2024 after the end of their transition periods (326-10-65-1 through 65-5).", "ASU 2025-05 (accounts receivable and contract assets) is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, with early adoption permitted; an interim adopter applies it as of the beginning of that annual period (326-10-65-6(a)-(b)).", "ASU 2025-05 is applied prospectively to estimates of expected credit losses on asset balances described in 326-20-30-10A performed after the date of adoption, and non-public business entities electing the practical expedient after the effective date need not perform a preferability assessment under 250-10-45-2 (326-10-65-6(c)-(d)).", "ASU 2025-08 (purchased loans) is effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods, with early adoption permitted (326-10-65-7(a)-(b)).", "ASU 2025-08 is applied prospectively to loans acquired on or after the date of initial application (326-10-65-7(c))." ], "categories": [ "Financial instruments", "Impairment", "Transition and effective dates" ], "audience_level": "intermediate", "student_note": "Students often look to 326-10 for the CECL measurement rules, but the Overall subtopic only supplies scope and transition dates — the operative measurement guidance lives in 326-20 (amortized cost) and 326-30 (available-for-sale debt securities). Note also that the ASU 2016-13 transition paragraphs no longer exist, so the live Section 65 content concerns only the 2025 amendments.", "related_topics": [ "326-20", "326-30", "310-10", "250-10", "805-20", "820-10" ], "key_concepts": [ "credit losses", "current expected credit losses", "scope", "effective dates", "transition method", "prospective application", "practical expedient", "purchased loans" ] } ``` Source downloaded (UTC): 2026-09-09T23:48:58.995Z to 2026-09-09T23:48:58.995Z Record version: sha256:4814086b30766073bd9d0a97e4525c860fb6af4870a16f1baa915f76ae7556c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-10-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/326/10/#00-status) SEC content: no ##### [326-10-00-1](https://asc.understandingaccounting.org/asc/326/10/#326-10-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:48:58.995Z to 2026-09-09T23:48:58.995Z Record version: sha256:ae98145f971e615047e880cf64119a7293924a2fda417a591ad4fc7600a79af9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Amortized Cost BasisAddedAccounting Standards Update No. 2016-1306/16/2016
Debt Security (1st def.)AmendedAccounting Standards Update No. 2016-1912/14/2016
Debt Security (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Effective Interest RateAmendedAccounting Standards Update No. 2016-1912/14/2016
Effective Interest RateAddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (1st def.)SupersededAccounting Standards Update No. 2016-1912/14/2016
Financial Asset (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (2nd def.)AddedAccounting Standards Update No. 2016-1912/14/2016
Loan (2nd def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Not-for-Profit EntityAddedAccounting Standards Update No. 2016-1306/16/2016
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAddedAccounting Standards Update No. 2016-1306/16/2016
Purchased Financial Assets with Credit DeteriorationAmendedAccounting Standards Update No. 2016-1912/14/2016
Purchased Financial Assets with Credit DeteriorationAddedAccounting Standards Update No. 2016-1306/16/2016
Securities and Exchange Commission (SEC) FilerAddedAccounting Standards Update No. 2016-1306/16/2016
Troubled Debt RestructuringSupersededAccounting Standards Update No. 2022-0203/31/2022
Troubled Debt RestructuringAddedAccounting Standards Update No. 2016-1306/16/2016
326-10-05-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-10-05-2AddedAccounting Standards Update No. 2016-1306/16/2016
326-10-15-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-10-65-1AmendedAccounting Standards Update No. 2022-0203/31/2022
326-10-65-1AmendedAccounting Standards Update No. 2019-1111/26/2019
326-10-65-1AmendedAccounting Standards Update No. 2019-1011/15/2019
326-10-65-1AmendedAccounting Standards Update No. 2019-0505/15/2019
326-10-65-1AmendedAccounting Standards Update No. 2019-0404/25/2019
326-10-65-1AmendedAccounting Standards Update No. 2018-1911/15/2018
326-10-65-1AmendedAccounting Standards Update No. 2017-0301/23/2017
326-10-65-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-10-65-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-10-65-2AddedAccounting Standards Update No. 2019-0404/25/2019
326-10-65-3AddedAccounting Standards Update No. 2019-0505/15/2019
326-10-65-4AmendedAccounting Standards Update No. 2020-0303/09/2020
326-10-65-4AddedAccounting Standards Update No. 2019-1111/26/2019
326-10-65-5AddedAccounting Standards Update No. 2022-0203/31/2022
326-10-65-6AddedAccounting Standards Update No. 2025-0507/30/2025
326-10-65-7AddedAccounting Standards Update No. 2025-0811/12/2025
Source downloaded (UTC): 2026-09-09T23:49:01.456Z to 2026-09-09T23:49:01.456Z Record version: sha256:d55702cb0594bdc12f27487ead32c0d4ca5ed66c4ec55302e3342a5ec313dcaa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/326/10/#05-overview-and-background) SEC content: no ##### [326-10-05-1](https://asc.understandingaccounting.org/asc/326/10/#326-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:01.456Z to 2026-09-09T23:49:01.456Z Record version: sha256:3c423a98a99c57191409dd328e30e7efbcff5181ce6d3e7a34139e71cd15cd05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Topic provides guidance on how an entity should measure credit losses on financial instruments. ##### [326-10-05-2](https://asc.understandingaccounting.org/asc/326/10/#326-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:01.456Z to 2026-09-09T23:49:01.456Z Record version: sha256:13fca5f62989ecef260496d24c3378d4dcc373879aa4db513eb77ce8a07bf5b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 326 includes the following Subtopics: 1. a Overall 2. b Financial Instruments—Credit Losses—Measured at Amortized Cost 3. c Financial Instruments—Credit Losses—Available-for-Sale Debt Securities Source downloaded (UTC): 2026-09-09T23:49:03.799Z to 2026-09-09T23:49:03.799Z Record version: sha256:b000e1263772d6444801bfa64b8281b688a58a08f57774095f71d853d6fa07c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/326/10/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [326-10-15-1](https://asc.understandingaccounting.org/asc/326/10/#326-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:03.799Z to 2026-09-09T23:49:03.799Z Record version: sha256:6865ed44fa42b3f6f99bf30a7cabce91af9a70771b9e7285569340ecf3ee5346 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:08bbe47431dcf3951fba39ca57cb81e345bb0b4fd82c6424550b59d5f3d91907 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-10-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/326/10/#65-transition-and-open-effective-date-information) SEC content: no ##### [326-10-65-1](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:eb3567a2f394878831fc7cefda5100886fda59a1867cd967af4d1134ae0ad21a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 06/21/2024 after the end of the transition period stated in Accounting Standards Updates No. 2016-13, _Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments_, No. 2018-19, _Codification Improvements to Topic 326, Financial Instruments—Credit Losses_, No. 2019-04, _Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments_, No. 2019-05, _Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief_, No. 2019-10, _Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates_, No. 2019-11, _Codification Improvements to Topic 326, Financial Instruments—Credit Losses_, and No. 2022-02, _Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures_. ##### [326-10-65-2](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:ba68b9740ebb408c86209a6c0dd1c7387b0afd9d1bc142902e74e8c4f2b99d2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 06/21/2024 after the end of the transition period stated in Accounting Standards Updates No. 2019-04, _Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments_. ##### [326-10-65-3](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:bdeea2f8c510db36183063d1a9d4ac350ae4cda5d83a48f6737c191881890fad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 06/21/2024 after the end of the transition period stated in Accounting Standards Updates No. 2019-05, _Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief_. ##### [326-10-65-4](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:c0d843cd8d32f61cd70458156cd51a664e22473ca7c59502dfbc6f183f0aab9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 06/21/2024 after the end of the transition period stated in Accounting Standards Updates No. 2019-11, _Codification Improvements to Topic 326, Financial Instruments—Credit Losses_, and No. 2020-03, _Codification Improvements to Financial Instruments_. ##### [326-10-65-5](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:ff1f4f2d68b4db47c5fe87d9b25d91e98bd6ad2901f91e5f71a1023206909257 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 06/21/2024 after the end of the transition period stated in Accounting Standards Updates No. 2022-02, _Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures_. #### Transition Related to Accounting Standards Update No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ##### [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:a08de6c1dd5bc13d6fb492f8dda8e2d8b4b078928379f43a02e315e7d9a2b3b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Accounting Standards Update 2025-05](https://asc.understandingaccounting.org/updates/asu-2025-05/) 2027-06-14 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 2025-12-16 The following represents the transition and effective date information related to Accounting Standards Update No. 2025-05, _Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets_: **Effective date and early adoption** 1. a All entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. 2. b Early adoption of the pending content that links to this paragraph is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall apply the pending content as of the beginning of the annual reporting period that includes that interim reporting period. **Transition method** 1. c An entity shall apply the pending content that links to this paragraph prospectively to estimates of expected credit losses on asset balances described in paragraph [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A) performed after the date of adoption. 2. d An entity other than a public business entity that elects the practical expedient and, if applicable, the accounting policy election after the effective date would not need to perform a preferability assessment in accordance with paragraph [250-10-45-2](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-2). #### Transition Related to Accounting Standards Update No. 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans ##### [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:10.588Z to 2026-09-09T23:49:10.588Z Record version: sha256:803ba6023ddad3374b295463933c5a71498b999a0cd94384fadf42c133ca7ffc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Accounting Standards Update 2025-08](https://asc.understandingaccounting.org/updates/asu-2025-08/) 2028-06-13 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 2026-12-16 The following represents the transition and effective date information related to Accounting Standards Update No. 2025-08, _Financial Instruments—Credit Losses (Topic 326): Purchased Loans_: **Effective date and early adoption** 1. a All entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. 2. b Early adoption of the pending content that links to this paragraph is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall apply the pending content as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. **Transition method** 1. c An entity shall apply the pending content that links to this paragraph prospectively to loans that are acquired on or after the date of initial application of the pending content. Source downloaded (UTC): 2026-09-09T23:49:16.307Z to 2026-09-09T23:49:55.257Z Record version: sha256:b68e8a34397aa51a97c0aa920f9ae49eea80a57031fd1dec77f0456141598641 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20: Financial Instruments—Credit Losses — Measured at Amortized Cost ### Machine-generated study aids ```json { "summary": "ASC 326-20 is the CECL (current expected credit loss) model for financial assets measured at amortized cost, net investments in leases, off-balance-sheet credit exposures, and reinsurance recoverables. At every reporting date an entity records an allowance (a valuation account deducted from amortized cost) equal to management's current estimate of all credit losses expected over the contractual term, based on past events, current conditions, and reasonable and supportable forecasts, with a reversion to historical loss information beyond the forecastable period (326-20-30-1, 30-6, 30-9). Assets are pooled when they share similar risk characteristics and evaluated individually only when they do not (326-20-30-2).", "key_points": [ "The allowance for credit losses is a valuation account deducted from (or added to) amortized cost to present the net amount expected to be collected, and expected recoveries of amounts previously written off may be included but cannot exceed amounts written off or expected to be written off (326-20-30-1).", "Expected credit losses are measured collectively when similar risk characteristics exist and individually when they do not; an asset may never be in both a pool and an individual assessment (326-20-30-2; risk characteristics listed at 326-20-55-5).", "No single method is required—discounted cash flow, loss-rate, roll-rate, probability-of-default, or aging schedule methods are all permitted; if DCF is used, expected cash flows are discounted at the asset's effective interest rate and the allowance equals amortized cost less the present value of expected cash flows (326-20-30-3 through 30-4).", "Losses are estimated over the contractual term, adjusted for prepayments, and the term is not extended for expected extensions, renewals, or modifications unless the option is in the contract and is not unconditionally cancellable by the entity (326-20-30-6); for a lessor's net investment in a lease, the lease term is the contractual term (326-20-30-6A).", "An entity must use historical loss experience adjusted for current conditions and reasonable and supportable forecasts, may not rely solely on past events, and must revert to historical loss information (immediately, straight-line, or another rational and systematic basis) for periods beyond which it can make reasonable and supportable forecasts (326-20-30-8 through 30-9).", "The estimate must include a measure of credit loss risk even if remote, but zero loss is permitted when historical information adjusted for current conditions and forecasts supports an expectation of zero nonpayment; collateral value alone is not sufficient support (326-20-30-10); credit enhancements are considered but freestanding contracts such as purchased credit default swaps may not offset the estimate (326-20-30-12).", "Practical expedients: measure losses at fair value of collateral when foreclosure is probable (326-20-35-4), for collateral-dependent financial assets when the borrower is in financial difficulty (326-20-35-5), and for continually replenished collateral (326-20-35-6); off-balance-sheet exposures are recorded as a liability over the period of the present contractual obligation unless unconditionally cancellable (326-20-30-11, 326-20-45-2)." ], "categories": [ "Impairment", "Financial instruments", "Subsequent measurement", "Disclosure" ], "audience_level": "intermediate", "student_note": "CECL replaced the old \"incurred loss\" trigger: a day-one allowance is required for lifetime expected losses even on a brand-new, performing loan, and even when the risk of loss is remote. The most common misunderstanding is thinking a discounted cash flow model is required (it is not) or that collateral value alone justifies a zero allowance (326-20-30-10).", "related_topics": [ "326-30", "310-10", "310-20", "842", "805", "944" ], "key_concepts": [ "current expected credit loss (cecl)", "allowance for credit losses", "amortized cost basis", "reasonable and supportable forecast", "reversion to historical loss information", "collateral-dependent financial asset", "purchased financial assets with credit deterioration", "off-balance-sheet credit exposure" ] } ``` Source downloaded (UTC): 2026-09-09T23:49:16.307Z to 2026-09-09T23:49:16.307Z Record version: sha256:3f551dc37927a51c32d7ebc3543242818c78c60ac20d4e3850f16f0067149c55 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/326/20/#00-status) SEC content: no ##### [326-20-00-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:16.307Z to 2026-09-09T23:49:16.307Z Record version: sha256:66061568e6a8653fa9415e83a5dc00c849c260e41eda1a29cce450cd73da155b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Amortized Cost BasisAddedAccounting Standards Update No. 2016-1306/16/2016
Class of Financing ReceivableAddedAccounting Standards Update No. 2016-1306/16/2016
Contract AssetAddedAccounting Standards Update No. 2025-0507/30/2025
Credit Quality IndicatorAddedAccounting Standards Update No. 2016-1306/16/2016
Current AssetsAddedAccounting Standards Update No. 2025-0507/30/2025
CustomerAddedAccounting Standards Update No. 2025-0507/30/2025
Debt Security (1st def.)AmendedAccounting Standards Update No. 2016-1912/14/2016
Debt Security (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Effective Interest RateAmendedAccounting Standards Update No. 2016-1912/14/2016
Effective Interest RateAddedAccounting Standards Update No. 2016-1306/16/2016
Fair Value (2nd def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (1st def.)SupersededAccounting Standards Update No. 2016-1912/14/2016
Financial Asset (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (2nd def.)AddedAccounting Standards Update No. 2016-1912/14/2016
Financial Statements Are Available to Be IssuedAddedAccounting Standards Update No. 2025-0507/30/2025
Financing ReceivableAddedAccounting Standards Update No. 2016-1306/16/2016
Freestanding ContractAddedAccounting Standards Update No. 2016-1306/16/2016
LeaseAddedAccounting Standards Update No. 2020-0303/09/2020
Lease TermAddedAccounting Standards Update No. 2020-0303/09/2020
LesseeAddedAccounting Standards Update No. 2020-0303/09/2020
LessorAddedAccounting Standards Update No. 2020-0303/09/2020
Line of Credit ArrangementAddedAccounting Standards Update No. 2016-1306/16/2016
Loan (2nd def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Loan CommitmentAddedAccounting Standards Update No. 2016-1306/16/2016
Market ParticipantsAddedAccounting Standards Update No. 2016-1306/16/2016
Not-for-Profit EntityAddedAccounting Standards Update No. 2016-1306/16/2016
Operating CycleAddedAccounting Standards Update No. 2025-0507/30/2025
Orderly TransactionAddedAccounting Standards Update No. 2016-1306/16/2016
Portfolio SegmentAddedAccounting Standards Update No. 2016-1306/16/2016
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAddedAccounting Standards Update No. 2016-1306/16/2016
Purchased Financial Assets with Credit DeteriorationAmendedAccounting Standards Update No. 2016-1912/14/2016
Purchased Financial Assets with Credit DeteriorationAddedAccounting Standards Update No. 2016-1306/16/2016
Reinsurance ReceivableSupersededAccounting Standards Update No. 2016-1912/14/2016
Reinsurance ReceivableAddedAccounting Standards Update No. 2016-1306/16/2016
Reinsurance RecoverableAddedAccounting Standards Update No. 2016-1912/14/2016
Related PartiesAddedAccounting Standards Update No. 2016-1306/16/2016
Standby Letter of CreditAddedAccounting Standards Update No. 2016-1306/16/2016
Troubled Debt RestructuringSupersededAccounting Standards Update No. 2022-0203/31/2022
Troubled Debt RestructuringAddedAccounting Standards Update No. 2016-1306/16/2016
Underlying AssetAddedAccounting Standards Update No. 2020-0303/09/2020
326-20-05-1AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-05-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-15-1 through 15-3
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-15-2AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-15-2AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-15-3AmendedAccounting Standards Update No. 2018-1911/15/2018
326-20-30-1AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-30-1 through 30-15
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-30-4AmendedAccounting Standards Update No. 2022-0203/31/2022
326-20-30-4AmendedAccounting Standards Update No. 2022-0103/28/2022
326-20-30-4AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-4AAmendedAccounting Standards Update No. 2025-1212/17/2025
326-20-30-4AAmendedAccounting Standards Update No. 2022-0203/31/2022
326-20-30-4AAddedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-5AmendedAccounting Standards Update No. 2022-0103/28/2022
326-20-30-5AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-5AAddedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-6AmendedAccounting Standards Update No. 2022-0203/31/2022
326-20-30-6AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-30-6AAddedAccounting Standards Update No. 2020-0303/09/2020
326-20-30-10A through 30-10H
AddedAccounting Standards Update No. 2025-0507/30/2025
326-20-30-12AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-30-13AmendedAccounting Standards Update No. 2019-1111/26/2019
326-20-30-13AAddedAccounting Standards Update No. 2019-1111/26/2019
326-20-35-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-35-1 through 35-10
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-35-4AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-35-4AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-35-5AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-35-6AmendedAccounting Standards Update No. 2019-1111/26/2019
326-20-35-6AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-35-7AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-35-8AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-35-8AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-35-8AAmendedAccounting Standards Update No. 2025-1212/17/2025
326-20-35-8AAddedAccounting Standards Update No. 2019-0404/25/2019
326-20-35-9SupersededAccounting Standards Update No. 2019-0404/25/2019
326-20-45-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-45-1 through 45-4
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-45-5AmendedAccounting Standards Update No. 2025-1212/17/2025
326-20-45-5AddedAccounting Standards Update No. 2019-0404/25/2019
326-20-50-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-1 through 50-22
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-50-3A through 50-3D
AddedAccounting Standards Update No. 2019-0404/25/2019
326-20-50-4 through 50-12
AmendedAccounting Standards Update No. 2025-1112/08/2025
326-20-50-4AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-6 through 50-7
AmendedAccounting Standards Update No. 2022-0203/31/2022
326-20-50-6AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-6AAddedAccounting Standards Update No. 2019-0404/25/2019
326-20-50-7AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-50-11AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-12AAddedAccounting Standards Update No. 2025-0507/30/2025
326-20-50-12BAddedAccounting Standards Update No. 2025-0507/30/2025
326-20-50-13 through 50-18
AmendedAccounting Standards Update No. 2025-1112/08/2025
326-20-50-13AmendedAccounting Standards Update No. 2024-0311/04/2024
326-20-50-13AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-50-13AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-14AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-16AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-19AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-50-20AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-1AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-1 through 55-85
AddedAccounting Standards Update No. 2016-1306/16/2016
326-20-55-2AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-5AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-8AmendedAccounting Standards Update No. 2020-0303/09/2020
326-20-55-9AmendedAccounting Standards Update No. 2022-0103/28/2022
326-20-55-17AmendedAccounting Standards Update No. 2025-0507/30/2025
326-20-55-17AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-40A through 55-40Q
AddedAccounting Standards Update No. 2025-0507/30/2025
326-20-55-51AmendedMaintenance Update No. 2025-05 (PDF)06/20/2025
326-20-55-52AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-55-79AmendedAccounting Standards Update No. 2022-0203/31/2022
326-20-55-79AmendedAccounting Standards Update No. 2019-0404/25/2019
326-20-55-81AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-83 through 55-85
AmendedAccounting Standards Update No. 2016-1912/14/2016
326-20-55-86 through 55-90
AddedAccounting Standards Update No. 2019-1111/26/2019
Source downloaded (UTC): 2026-09-09T23:49:19.997Z to 2026-09-09T23:49:19.997Z Record version: sha256:ec77823410d56fd5beb7c0eb6c6b31b620413d0e3c0e6a7e9159dd948606762f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/326/20/#05-overview-and-background) SEC content: no ##### [326-20-05-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:19.997Z to 2026-09-09T23:49:19.997Z Record version: sha256:a7eb0884a098ae4eb1225f3d8d9467caaabb8f195a1f58abe665753ae1c72666 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on how an entity should measure expected credit losses on financial instruments measured at amortized cost and on leases, off-balance-sheet credit exposures, and reinsurance recoverables. Source downloaded (UTC): 2026-09-09T23:49:22.184Z to 2026-09-09T23:49:22.184Z Record version: sha256:3dc08e97e2df19d23d24ab1d08e49e2d788c97574441b31b1325b7cb825493d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/326/20/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [326-20-15-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:22.184Z to 2026-09-09T23:49:22.184Z Record version: sha256:9190f77497a9bf1162b747998bf7955a038fde4b78c0c7aad42d2a56c2ae97b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Instruments ##### [326-20-15-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:22.184Z to 2026-09-09T23:49:22.184Z Record version: sha256:339c7072665c3b4ec5aef6235de6e7fd1dcd6186d970358b5bfcb683f88059ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following items: 1. a Financial assets measured at amortized cost basis, including the following: 1. 1 [Financing receivables](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") 2. 2 Held-to-maturity [debt securities](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.") 3. 3 Receivables that result from revenue transactions within the scope of Topic 605 on revenue recognition, Topic 606 on revenue from contracts with customers, and Topic 610 on other income 4. 4 [Subparagraph superseded by Accounting Standards Update No. 2019-04](https://asc.understandingaccounting.org/updates/asu-2019-04/). 5. 5 Receivables that relate to repurchase agreements and securities lending agreements within the scope of Topic 860. 2. b Net investments in leases recognized by a lessor in accordance with Topic 842 on leases. 3. c Off-balance-sheet credit exposures not accounted for as insurance. Off-balance-sheet credit exposure refers to credit exposures on off-balance-sheet loan commitments, standby letters of credit, financial guarantees not accounted for as insurance, and other similar instruments, except for instruments within the scope of Topic 815 on derivatives and hedging. 4. d [Reinsurance recoverables](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") that result from insurance transactions within the scope of Topic 944 on insurance. ##### [326-20-15-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:22.184Z to 2026-09-09T23:49:22.184Z Record version: sha256:e45d8b0af963441cf5e99c58562e88309d6bbffa234bc6d02dca82d25104014f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following items: 1. a Financial assets measured at [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.") through net income 2. b Available-for-sale debt securities 3. c [Loans](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.") made to participants by defined contribution employee benefit plans 4. d Policy loan receivables of an insurance entity 5. e Promises to give (pledges receivable) of a not-for-profit entity 6. f Loans and receivables between entities under common control. 7. g Receivables arising from operating leases accounted for in accordance with Topic 842. Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:6dbe635f9ea80aab77826e69249b4198d6320f8ea2757b6c4bacdc3f9235f0c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/326/20/#30-initial-measurement) SEC content: no #### Developing an Estimate of Expected Credit Losses ##### [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:02f6628a9d9165f6f5fcdb2e318c5bfbb90655ba21cfafd30d1811949a121b73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The allowance for credit losses is a valuation account that is deducted from, or added to, 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.") of the [financial asset(s)](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") to present the net amount expected to be collected on the financial asset. Expected recoveries of amounts previously written off and expected to be written off shall be included in the valuation account and shall not exceed the aggregate of amounts previously written off and expected to be written off by an entity. At the reporting date, an entity shall record an allowance for credit losses on financial assets within the scope of this Subtopic. An entity shall report in net income (as a 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). ##### [326-20-30-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:f322bd909d3a601c2bc997da8b3a4a79e784f5c545e54d237d4054321f42d8c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall measure expected credit losses of financial assets on a collective (pool) basis when similar risk characteristic(s) exist (as described in paragraph [326-20-55-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-5)). If an entity determines that a financial asset does not share risk characteristics with its other financial assets, the entity shall evaluate the financial asset for expected credit losses on an individual basis. If a financial asset is evaluated on an individual basis, an entity also should not include it in a collective evaluation. That is, financial assets should not be included in both collective assessments and individual assessments. ##### [326-20-30-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:b099e1807a2b3d2b7fbb2d4031a6e972bfdcb02253c82ed92a34a56654e2b4fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The allowance for credit losses may be determined using various methods. For example, an entity may use discounted cash flow methods, loss-rate methods, roll-rate methods, probability-of-default methods, or methods that utilize an aging schedule. An entity is not required to utilize a discounted cash flow method to estimate expected credit losses. Similarly, an entity is not required to reconcile the estimation technique it uses with a discounted cash flow method. ##### [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:064c01a8917a08bab58a9574a30ebca5dfccc7a5926d952e9abd76bd4653e6f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity estimates expected credit losses using methods that project future principal and interest cash flows (that is, a discounted cash flow method), the entity shall discount expected cash flows at the financial asset's [effective interest rate](https://asc.understandingaccounting.org/glossary/e/#effective-interest-rate "The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition."). When a discounted cash flow method is applied, the allowance for credit losses shall reflect the difference between the amortized cost basis and the present value of the expected cash flows. If a financial asset is modified and is considered to be a continuation of the original asset, an entity shall use the post-modification contractual interest rate to derive the effective interest rate when using a discounted cash flow method. See paragraph [815-25-35-10](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-10) for guidance on the treatment of a basis adjustment related to an existing portfolio layer method hedge. If the financial asset's contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, for example, the prime rate, the London Interbank Offered Rate (LIBOR), or the U.S. Treasury bill weekly average, that financial asset's effective interest rate (used to discount expected cash flows as described in this paragraph) shall be calculated based on the factor as it changes over the life of the financial asset. An entity is not required to project changes in the factor for purposes of estimating expected future cash flows. If the entity projects changes in the factor for the purposes of estimating expected future cash flows, it shall use the same projections in determining the effective interest rate used to discount those cash flows. In addition, if the entity projects changes in the factor for the purposes of estimating expected future cash flows, it shall adjust the effective interest rate used to discount expected cash flows to consider the timing (and changes in the timing) of expected cash flows resulting from expected prepayments in accordance with paragraph [326-20-30-4A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4A). Subtopic 310-20 on receivables—nonrefundable fees and other costs provides guidance on the calculation of interest income for variable rate instruments. ##### [326-20-30-4A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:2b27747dbe9c7cc844ceae73a7434dccaf3a432ab9d649823de57cad774781c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As an accounting policy election for each class of financing receivable or major security type, an entity may adjust the effective interest rate used to discount expected cash flows to consider the timing (and changes in timing) of expected cash flows resulting from expected prepayments. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)As an accounting policy election for each [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") or major security type, an entity may adjust the effective interest rate used to discount expected cash flows to consider the timing (and changes in timing) of expected cash flows resulting from expected prepayments. ##### [326-20-30-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:8b4c7a84db0d95f7288068926ca118209bfd64dc67d00bca2f7f1e2a872d73f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity estimates expected credit losses using a method other than a discounted cash flow method described in paragraph [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4), the allowance for credit losses shall reflect the entity's expected credit losses of the amortized cost basis of the financial asset(s) as of the reporting date. For example, if an entity uses a loss-rate method, the numerator would include the expected credit losses of the amortized cost basis (that is, amounts that are not expected to be collected in cash or other consideration, or recognized in income). In addition, when an entity expects to accrete a discount into interest income, the discount should not offset the entity's expectation of credit losses. An entity may develop its estimate of expected credit losses by measuring components of the amortized cost basis on a combined basis or by separately measuring the following components of the amortized cost basis, including all of the following: 1. a Amortized cost basis, excluding applicable accrued interest, premiums, discounts (including net deferred fees and costs), foreign exchange, and fair value hedge accounting adjustments (that is, the face amount or unpaid principal balance). 2. b Premiums or discounts, including net deferred fees and costs, foreign exchange, and fair value hedge accounting adjustments. See paragraph [815-25-35-10](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-10) for guidance on the treatment of a basis adjustment related to an existing portfolio layer method hedge. 3. c Applicable accrued interest. See paragraph [326-20-30-5A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5A) for guidance on excluding accrued interest from the calculation of the allowance for credit losses. ##### [326-20-30-5A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5A) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:87682f3fd51a342d6ad31a4405143f0d5e6e736c53a640d47d6b6614e53c299d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may make an accounting policy election, at the class of financing receivable or the major security-type level, not to measure an allowance for credit losses for accrued interest receivables if the entity writes off the uncollectible accrued interest receivable balance in a timely manner. This accounting policy election should be considered separately from the accounting policy election in paragraph [326-20-35-8A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8A). An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. ##### [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:8d07228bdecdf0937b78be7a24648febbefcad462bf1ea9e88821684250ee271 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall estimate expected credit losses over the contractual term of the financial asset(s) when using the methods in accordance with paragraph [326-20-30-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5). An entity shall consider prepayments as a separate input in the method or prepayments may be embedded in the credit loss information in accordance with paragraph [326-20-30-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5). An entity shall consider estimated prepayments in the future principal and interest cash flows when utilizing a method in accordance with paragraph [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4). An entity shall not extend the contractual term for expected extensions, renewals, and modifications unless the following applies: 1. a [Subparagraph superseded by Accounting Standards Update No. 2022-02](https://asc.understandingaccounting.org/updates/asu-2022-02/). 2. b The extension or renewal options (excluding those that are accounted for as derivatives in accordance with Topic 815) are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the entity. ##### [326-20-30-6A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6A) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:27fb0a996b25fa27035315f9466def5176b3c1f230152cb5455073680d6ce14c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For net investment in [leases](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") recognized by a [lessor](https://asc.understandingaccounting.org/glossary/l/#lessor "An entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration.") in accordance with Topic 842, instead of applying the guidance in paragraph [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6), an entity shall use the [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.") as the contractual term. ##### [326-20-30-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:7992bab0a0cddd83850ce3e01443daf142eb1438df245f81b0940e2bc1d64776 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When developing an estimate of expected credit losses on financial asset(s), an entity shall consider available information relevant to assessing the collectibility of cash flows. This information may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. An entity shall consider relevant qualitative and quantitative factors that relate to the environment in which the entity operates and are specific to the borrower(s). When financial assets are evaluated on a collective or individual basis, an entity is not required to search all possible information that is not reasonably available without undue cost and effort. Furthermore, an entity is not required to develop a hypothetical pool of financial assets. An entity may find that using its internal information is sufficient in determining collectibility. ##### [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:ea13fb23530c13db382f47481e95e180d95d9c51f4b9f1da9563d496aebe7411 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Historical credit loss experience of financial assets with similar risk characteristics generally provides a basis for an entity's assessment of expected credit losses. Historical loss information can be internal or external historical loss information (or a combination of both). An entity shall consider adjustments to historical loss information for differences in current asset specific risk characteristics, such as differences in underwriting standards, portfolio mix, or asset term within a pool at the reporting date or when an entity's historical loss information is not reflective of the contractual term of the financial asset or group of financial assets. ##### [326-20-30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:f85acf42a7914003db87e212a4599f21889a3b3e76a8f77cd1d7d9986bdae00f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall not rely solely on past events to estimate expected credit losses. When an entity uses historical loss information, it shall consider the need to adjust historical information to reflect the extent to which management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The adjustments to historical loss information may be qualitative in nature and should reflect changes related to relevant data (such as changes in unemployment rates, property values, commodity values, delinquency, or other factors that are associated with credit losses on the financial asset or in the group of financial assets). Some entities may be able to develop reasonable and supportable forecasts over the contractual term of the financial asset or a group of financial assets. However, an entity is not required to develop forecasts over the contractual term of the financial asset or group of financial assets. Rather, for periods beyond which the entity is able to make or obtain reasonable and supportable forecasts of expected credit losses, an entity shall revert to historical loss information determined in accordance with paragraph [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) that is reflective of the contractual term of the financial asset or group of financial assets. An entity shall not adjust historical loss information for existing economic conditions or expectations of future economic conditions for periods that are beyond the reasonable and supportable period. An entity may revert to historical loss information at the input level or based on the entire estimate. An entity may revert to historical loss information immediately, on a straight-line basis, or using another rational and systematic basis. ##### [326-20-30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:766bce39abb08d03551b195dd89fd4fc249632f8c6f2974e9ee789766c51cdf5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's estimate of expected credit losses shall include a measure of the expected risk of credit loss even if that risk is remote, regardless of the method applied to estimate credit losses. However, an entity is not required to measure expected credit losses on a financial asset (or group of financial assets) in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Except for the circumstances described in paragraphs [326-20-35-4 through 35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-4) , an entity shall not expect nonpayment of the amortized cost basis to be zero solely on the basis of the current value of collateral securing the financial asset(s) but, instead, also shall consider the nature of the collateral, potential future changes in collateral values, and historical loss information for financial assets secured with similar collateral. ##### [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:138ea35cfe5412bd7e08f607901d05e2ee7bc885a9b5186aeffaea5a524c4623 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)An entity may elect the practical expedient described in paragraphs [326-20-30-10C through 30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) and an entity other than a public business entity may elect the accounting policy described in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) when developing an estimate of expected credit losses on current accounts receivable and current [contract asset](https://asc.understandingaccounting.org/glossary/c/#contract-asset "An entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity's future performance).") balances arising from transactions accounted for under Topic 606 on revenue from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration."). This includes those asset balances acquired in a transaction accounted for under Topic 805 on business combinations or recognized through the consolidation of a variable interest entity that is not a business as described in paragraph [810-10-30-3](https://asc.understandingaccounting.org/asc/810/10/#810-10-30-3) that arose from transactions that the acquiree or variable interest entity accounted for under Topic 606. ##### [326-20-30-10B](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:009aea87838dd4e7a20cda75a40eed79b8f233169ab97189dfe84f65c07168f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)When elected, the practical expedient and accounting policy election shall be applied consistently to all current accounts receivable and current contract assets described in paragraph [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A). When determining whether an accounts receivable or contract asset balance is a [current asset](https://asc.understandingaccounting.org/glossary/c/#current-assets "Current assets is used to designate cash and other assets or resources commonly identified as those that are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. See paragraphs 210-10-45-1210-10-45-2210-10-45-3210-10-45-4."), an entity should use a one-year period unless an entity’s [operating cycle](https://asc.understandingaccounting.org/glossary/o/#operating-cycle "The average time intervening between the acquisition of materials or services and the final cash realization constitutes an operating cycle.") exceeds 12 months, in which case the longer period shall be used (see paragraph [210-10-45-3](https://asc.understandingaccounting.org/asc/210/10/#210-10-45-3)). ##### [326-20-30-10C](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:9fc288690f64de13e9332360e4ba254f2bb8482bd75186e62688dfb30d346659 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)For assets described in paragraph [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A), an entity may elect a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ##### [326-20-30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10D) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:bf323047cbac0ee724c85cc84110d7c5f6d1351f939f138080665c7417f92144 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)When developing an estimate of expected credit losses for assets to which the practical expedient is applied, an entity shall continue to adjust historical loss information to reflect current conditions to the extent that historical loss information does not reflect current conditions. For example, an entity that has identified an individual customer that is experiencing financial distress would consider that information in its estimate of expected credit losses for that customer even if that information has not yet affected its historical loss experience (that is, even if the customer has not defaulted as of the balance sheet date). Similarly, an entity that has expanded its credit policies before the balance sheet date to offer credit to lower-credit-quality customers would consider that information in its estimate of expected credit losses even if that change has not yet affected its historical loss experience (that is, even if the new, lower-credit-quality customers have not defaulted as of the balance sheet date). As another example, if an entity determined that economic conditions as of the balance sheet date were different from the conditions that existed over the period during which historical data were collected because of the onset of a severe economic recession before the balance sheet date, the entity should consider whether an adjustment to historical loss information is necessary. See paragraph [326-20-50-12A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A) for related disclosure requirements and paragraphs [326-20-55-40A through 55-40Q](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40A) for an illustrative Example. ##### [326-20-30-10E](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:c4b50ad7d082b12868d10546220f33ba92005f3134e3c5830c2d2e7ba7e3bde4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)An entity other than a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.") that elects the practical expedient in paragraphs [326-20-30-10C through 30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) may also elect an accounting policy when estimating expected credit losses to consider collection activity after the balance sheet date but before the entity’s [financial statements are available to be issued](https://asc.understandingaccounting.org/glossary/f/#financial-statements-are-available-to-be-issued "Financial statements are considered available to be issued when they are complete in a form and format that complies with GAAP and all approvals necessary for issuance have been obtained, for example, from management, the board of directors, and/or significant shareholders. The process involved in creating and distributing the financial statements will vary depending on an entity's management and corporate governance structure as well as statutory and regulatory requirements.") (or before any alternative date selected by the entity that is after the balance sheet date but before the financial statements are available to be issued). For example, under this accounting policy election, the allowance for credit losses related to those asset balances described in paragraph [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A) that are collected before an entity’s financial statements are available to be issued (or before the alternative date selected by the entity) would be zero. See paragraphs [326-20-50-12A through 50-12B](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A) for specific disclosure requirements applicable to this accounting policy election. ##### [326-20-30-10F](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10F) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:d50102455a8d6455b350b5603d4bd1fe423e353021b327c0039d08c6ae7ff5db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)An entity other than a public business entity that applies the practical expedient and the accounting policy election shall estimate its expected credit losses on current accounts receivable and current contract asset balances in the following sequence: 1. a The entity shall first consider subsequent collections of those asset balances described in paragraph [326-20-30-10A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A) that were outstanding as of the balance sheet date. No credit loss allowance shall be recorded for asset balances that have been collected before the financial statements are available to be issued (or before the alternative date selected by the entity). 2. b The entity shall then evaluate any remaining uncollected amounts as of the date that the financial statements are available to be issued (or as of the alternative date selected by the entity) using the practical expedient in paragraphs [326-20-30-10C through 30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) . That evaluation shall be based on the delinquency status of those uncollected balances as of the date that the financial statements are available to be issued (or the alternative date selected by the entity). See paragraphs [326-20-55-40J through 55-40Q](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40J) for an illustrative Example. ##### [326-20-30-10G](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10G) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:ca4852e36eff54e88714a2025e30d9e7f34510fcfe97c603b4d109a20c5b3347 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)For entities estimating expected credit losses using an aging schedule (as illustrated in paragraphs [326-20-55-37 through 55-40Q](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-37) ), an entity other than a public business entity that elects to consider subsequent collection activity is permitted, but not required, to update historical loss rates for collection activity after the balance sheet date when determining the allowance for credit losses for amounts outstanding as of the balance sheet date that remain uncollected as of the date that the financial statements are available to be issued (or the alternative date selected by the entity). ##### [326-20-30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10H) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:9b7b67db2e4f40c4ca13f4c5c4933729d7761ec0df2854fd6afc84f64f80f042 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)A change in the date through which an entity considers subsequent collection activity when applying the accounting policy election is not a change in an accounting principle in accordance with Topic 250 on accounting changes and error corrections. ##### [326-20-30-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:e74872e470d8a29c02db6461e0026b1116042d60a749209e8da6159821f4ccc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In estimating expected credit losses for off-balance-sheet credit exposures, an entity shall estimate expected credit losses on the basis of the guidance in this Subtopic over the contractual period in which the entity is exposed to credit risk via a present contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the issuer. At the reporting date, an entity shall record a liability for credit losses on off-balance-sheet credit exposures within the scope of this Subtopic. An entity shall report in net income (as a 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. For that period of exposure, the estimate of expected credit losses should consider both the likelihood that funding will occur (which may be affected by, for example, a material adverse change clause) and an estimate of expected credit losses on commitments expected to be funded over its estimated life. If an entity uses a discounted cash flow method to estimate expected credit losses on off-balance-sheet credit exposures, the discount rate used should be consistent with the guidance in Section 310-20-35. ##### [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:f376b7fd82d2c6fd0a3d6b9a5bffff9931c6ec97f9e238bba7dc037dde2004c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimate of expected credit losses shall reflect how credit enhancements (other than those that are [freestanding contracts](https://asc.understandingaccounting.org/glossary/f/#freestanding-contract "A freestanding contract is entered into either: Separate and apart from any of the entity's other financial instruments or equity transactions In conjunction with some other transaction and is legally detachable and separately exercisable.")) mitigate expected credit losses on [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."), including consideration of the financial condition of the guarantor, the willingness of the guarantor to pay, and/or whether any subordinated interests are expected to be capable of absorbing credit losses on any underlying financial assets. However, when estimating expected credit losses, an entity shall not combine a financial asset with a separate freestanding contract that serves to mitigate credit loss. As a result, the estimate of expected credit losses on a financial asset (or group of financial assets) shall not be offset by a freestanding contract (for example, a purchased credit-default swap) that may mitigate expected credit losses on the financial asset (or group of financial assets). #### Purchased Financial Assets with Credit Deterioration ##### [326-20-30-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:0ae243b163305dab55a8b68a57b9bd418b9bb5ae6ead147c464c89d9026362c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall record the allowance for credit losses for [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") in accordance with paragraphs [326-20-30-2 through 30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-2) , [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12), and [326-20-30-13A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13A). An entity shall add the allowance for credit losses at the date of acquisition to the purchase price to determine the initial [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.") for purchased financial assets with credit deterioration. Any noncredit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration shall be allocated to each individual asset. At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any noncredit discount or premium. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)
Editor's Note: The content of paragraph 326-20-30-13 will change upon transition, together with a change in the heading noted below.
> Purchased Financial Assets with Credit Deterioration and Purchased Seasoned Loans
An entity shall record the allowance for credit losses for [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.")and [purchased seasoned loans](https://asc.understandingaccounting.org/glossary/p/#purchased-seasoned-loans "(P) December 16, 2026; (N) December 16, 2026 326-10-65-7 Paragraphs 326-20-30-16326-20-30-17326-20-30-18 define the term purchased seasoned loans.")in accordance with paragraphs [326-20-30-2 through 30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-2) , [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12), and [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14). Additionally, expected recoveries of amounts previously written off and expected to be written off shall be included in determining the allowance for credit losses in accordance with paragraph [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1) for purchased seasoned loans and paragraph [326-20-30-13A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13A) for purchased financial assets with credit deterioration. An entity shall add the allowance for credit losses at the date of acquisition to the purchase price to determine the initial [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.") for purchased financial assets with credit deterioration and purchased seasoned loans. Any noncredit discount or premium resulting from acquiring a pool of purchased financial assets with credit deterioration or purchased seasoned loans shall be allocated to each individual asset. At the acquisition date, the initial allowance for credit losses determined on a collective basis shall be allocated to individual assets to appropriately allocate any noncredit discount or premium. ##### [326-20-30-13A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13A) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:11e9d90940a6f50a99d520a70cfb7bcb819b717e55ded1f455bc1f3312d849a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The allowance for credit losses for purchased financial assets with credit deterioration shall include expected recoveries of amounts previously written off and expected to be written off by the entity and shall not exceed the aggregate of amounts previously written off and expected to be written off by the entity. 1. a If the entity estimates expected credit losses using a method other than a discounted cash flow method in accordance with paragraph [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4), expected recoveries shall not include any amounts that result in an acceleration of the noncredit discount. 2. b The entity may include increases in expected cash flows after acquisition. (See Examples 18 and 19 in paragraphs [326-20-55-86 through 55-90](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-86) .) ##### [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:a79f220c298f87817d1b226c3b76763813238f39670a73ac71d33f5670f53472 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity estimates expected credit losses using a discounted cash flow method, the entity shall discount expected credit losses at the rate that equates the present value of the purchaser's estimate of the asset's future cash flows with the purchase price of the asset. If an entity estimates expected credit losses using a method other than a discounted cash flow method, the entity shall estimate expected credit losses on the basis of the unpaid principal balance (face value) of the financial asset(s). See paragraphs [326-20-55-66 through 55-78](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-66) for implementation guidance and examples. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)If an entity estimates expected credit losses using a discounted cash flow method for purchased financial assets with credit deterioration and purchased seasoned loans, the entity shall discount expected credit losses at the rate that equates the present value of the purchaser's estimate of the asset's future cash flows with the purchase price of the asset. If an entity estimates expected credit losses using a method other than a discounted cash flow method, the entity shall estimate expected credit losses on the basis of the unpaid principal balance (face value) of the financial asset(s), unless the entity elects the accounting policy election in paragraph [326-20-35-1A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1A) for purchased seasoned loans. See paragraphs [326-20-55-66 through 55-78](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-66) for implementation guidance and examples. ##### [326-20-30-15](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-15) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:10f6f177620eb6fafd514c822de22a0c2eeb8b1e1ba68d83604289971dfeb667 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall account for purchased financial assets that do not have a more-than-insignificant deterioration in credit quality since origination in a manner consistent with originated financial assets in accordance with paragraphs [326-20-30-1 through 30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1) and [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12). An entity shall not apply the guidance in paragraphs [326-20-30-13 through 30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) for purchased financial assets that do not have a more-than-insignificant deterioration in credit quality since origination. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)An entity shall account for purchased financial assets that do not have a more-than-insignificant deterioration in credit quality since origination or are not purchased seasoned loans in a manner consistent with originated financial assets in accordance with paragraphs [326-20-30-1 through 30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1) and [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12). ##### [326-20-30-16](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-16) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:312255ab0e5a1c577aed453fbdc8edba0dafcaa7f8074e4664dbfc91d75baf28 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)A purchased seasoned loan is a [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.") that meets either of the following criteria and is not a purchased financial asset with credit deterioration or a financial asset listed in paragraph [326-20-30-19](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-19): 1. a The loan is obtained through a business combination accounted for using the acquisition method in accordance with Subtopic 805-20. 2. b The loan is (i) obtained through a transfer that is not a business combination accounted for using the acquisition method in accordance with Subtopic 805-20 or (ii) initially recognized through the consolidation of a variable interest entity in accordance with paragraph [810-10-30-3](https://asc.understandingaccounting.org/asc/810/10/#810-10-30-3). In addition, the loan must meet both of the following criteria: 1. 1 The loan is obtained more than 90 days after its origination date. 2. 2 The transferee was not involved with the origination of the loan. See paragraph [326-20-30-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-17) for guidance on how to assess whether the transferee was involved with the origination of the loan. ##### [326-20-30-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-17) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:1b47de15370473833365f342eae996bbb2c540f36fd7123e7037d173490a9d97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)The transferee is more likely to be involved with the origination of a loan when the transfer of that loan is effected through the terms of an existing contractual relationship, financing arrangement, purchase commitment, or other agreement with the entity that originated and transferred the loan. The transferee is involved with the origination of a loan when either of the following occurs: 1. a Within 90 days after the loan origination date, the transferee has direct or indirect exposure to the economic risks and rewards of ownership. 2. b The transferee has substantive influence on the offering, arranging, underwriting, or other nonadministrative lending activity performed by the originator (the transferor) related to the initial extension of credit to a debtor. ##### [326-20-30-18](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-18) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:146a9e19813f3bd112680342f42814bb85653b14949f8c4cee7699e16ba47411 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)When the transferee acquires a group of loans under paragraph [326-20-30-16(b)](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-16), it shall evaluate the guidance in paragraph [326-20-30-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-17) on an individual loan basis. ##### [326-20-30-19](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-19) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:26.152Z to 2026-09-09T23:49:26.152Z Record version: sha256:a7cf5129512a807187e005cb3f55d8bf5cef901e7112f7cd74c10ce2ba545883 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)Purchased seasoned loans do not include the following: 1. a Credit cards 2. b [Debt securities](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.") 3. c Trade receivables arising from transactions accounted for under Topic 606 on revenue from contracts with customers. Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:dd625ee83fbd0c8ab5a1ed865d6ac6e3757579db1980f73b4a9df2bcd119d5fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/326/20/#35-subsequent-measurement) SEC content: no #### Reporting Changes in Expected Credit Losses ##### [326-20-35-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:c6127fe4eecb938db1afefae79041db213a6c0f36805ef68af888957b6f237a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At each reporting date, an entity shall record an allowance for credit losses on [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") (including [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.")) 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](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14) generally would be applied consistently over time and shall faithfully estimate expected credit losses for financial asset(s). Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)At each reporting date, an entity shall record an allowance for credit losses on [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") (including [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.")and [purchased seasoned loans](https://asc.understandingaccounting.org/glossary/p/#purchased-seasoned-loans "(P) December 16, 2026; (N) December 16, 2026 326-10-65-7 Paragraphs 326-20-30-16326-20-30-17326-20-30-18 define the term 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](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1B), the method applied to initially measure expected credit losses for the assets included in paragraph [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14) generally would be applied consistently over time and shall faithfully estimate expected credit losses for financial asset(s). ##### [326-20-35-1A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:9cd7c1eb484d911b94c28797cdc3772e7789735ad37fc6d6b30096aefea71a73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)If 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](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4), the entity may elect to measure an allowance for credit losses on purchased seasoned loans using 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.") and apply the guidance in paragraph [326-20-30-2](https://asc.understandingaccounting.org/asc/326/20/#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. ##### [326-20-35-1B](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:121c744ab04465bd852a12a81775bd10d416e7e80f60729da6d10db67bcecb78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)If an entity elects the option in paragraph [326-20-35-1A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1A), the initial amortized cost basis measured in accordance with paragraph [326-20-30-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) and effective interest rate measured in accordance with paragraph [310-10-35-53B](https://asc.understandingaccounting.org/asc/310/10/#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. ##### [326-20-35-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:de5482c015087d2378cf44a772f74c013f82bc4633fd972cae70ebc7c2878195 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [326-20-35-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:b9c108588f0db012c0009788897a4561109252bff28bb4257e56141938d74359 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. #### Financial Assets Secured by Collateral ##### [326-20-35-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:138f1753749113aee8822c227beca917bc0f01d24335e728b184d518c6730898 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regardless of the initial measurement method, an entity shall measure expected credit losses based on 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.") of the collateral at the reporting date when the entity determines that foreclosure is probable. The entity shall adjust the fair value of the collateral for the estimated costs to sell if it intends to sell rather than operate the collateral. When an entity determines that foreclosure is probable, the entity shall remeasure the [financial asset](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") at the fair value of the collateral at the reporting date (less costs to sell, if applicable) so that the reporting of a credit loss is not delayed until actual foreclosure. An entity also shall consider any credit enhancements that meet the criteria in paragraph [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12) that are applicable to the financial asset when recording the allowance for credit losses. An allowance for credit losses that is added to 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.") of the financial asset(s) shall not exceed amounts previously written off. ##### [326-20-35-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:e8c1a91f225fb0850c4d2e2d2d307a2295f86067cdc3b38d1fb140d83984437d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may use, as a practical expedient, the fair value of the collateral at the reporting date when recording the net carrying amount of the asset and determining the allowance for credit losses for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty based on the entity's assessment as of the reporting date (collateral-dependent financial asset). If an entity uses the practical expedient on a collateral-dependent financial asset and repayment or satisfaction of the asset depends on the sale of the collateral, the fair value of the collateral shall be adjusted for estimated costs to sell. However, the entity shall not incorporate in the net carrying amount of the financial asset the estimated costs to sell the collateral if repayment or satisfaction of the financial asset depends only on the operation, rather than on the sale, of the collateral. When the fair value (less costs to sell, if applicable) of the collateral at the reporting date exceeds the amortized cost basis of the financial asset, an entity shall adjust the allowance for credit losses to present the net amount expected to be collected on the financial asset equal to the fair value (less costs to sell, if applicable) of the collateral as long as the allowance that is added to the amortized cost basis of the financial asset(s) does not exceed amounts previously written off. If the fair value of the collateral is less than the amortized cost basis of the financial asset for which the practical expedient has been elected, an entity shall recognize an allowance for credit losses on the collateral-dependent financial asset, which is measured as the difference between the fair value of the collateral, less costs to sell (if applicable), at the reporting date and the amortized cost basis of the financial asset. An entity also shall consider any credit enhancements that meet the criteria in paragraph [326-20-30-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-12) that are applicable to the financial asset when recording the allowance for credit losses. ##### [326-20-35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:22fbdaeeb7bf2f9a421058ca85a563c8ff8c43efb298595c13cf29bcf406e0d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For certain [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."), the borrower may be contractually required to continually adjust the amount of the collateral securing the financial asset(s) as a result of [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.") changes in the collateral. In those situations, if an entity reasonably expects the borrower to continue to replenish the collateral to meet the requirements of the contract, an entity may use, as a practical expedient, a method that compares 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.") with the fair value of collateral at the reporting date to measure the estimate of expected credit losses. An entity may determine that the expectation of nonpayment of the amortized cost basis is zero if the fair value of the collateral is equal to or exceeds the amortized cost basis of the financial asset and the entity reasonably expects the borrower to continue to replenish the collateral as necessary to meet the requirements of the contract. If the fair value of the collateral at the reporting date is less than the amortized cost basis of the financial asset and the entity reasonably expects the borrower to continue to replenish the collateral as necessary to meet the requirements of the contract, the entity shall estimate expected credit losses for the unsecured amount of the amortized cost basis. The allowance for credit losses on the financial asset is limited to the difference between the fair value of the collateral at the reporting date and the amortized cost basis of the financial asset. #### Loans Subsequently Identified for Sale ##### [326-20-35-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:43f5cb9af4b4eb79711dcd5b13a4d2985c51706598e76f72dd92615a9137515a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Once a decision has been made to sell [loans](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.") not currently classified as held for sale, those loans shall be transferred into the held-for-sale classification. See paragraph [310-10-35-48A](https://asc.understandingaccounting.org/asc/310/10/#310-10-35-48A) for guidance on transfers of nonmortgage loans between classifications and see Topic 948 for guidance on transfers of mortgage loans between classifications. The application of the writeoff guidance in paragraph [326-20-35-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8) may result in a portion of the amortized cost basis being written off before the loan has been transferred to the held-for-sale classification. #### Writeoffs of Financial Assets ##### [326-20-35-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:0a716446a94493db7872f6a03ed6bafc2128df300ddf6c32852b6f7842539f16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Writeoffs of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."), which may be full or partial writeoffs, shall be deducted from the allowance. The writeoffs shall be recorded in the period in which the financial asset(s) are deemed uncollectible. ##### [326-20-35-8A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:a9a8dc103a7759b4025b34b44a99a6c3848079f95d06921498071c01ca5e2649 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5A). An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)An entity may make an accounting policy election, at the [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") 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](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5A). An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. ##### [326-20-35-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:494767c127e9a324cc11fafae4ecccd7d7c548e6fff2cd318946b909b9f73ef0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2019-04](https://asc.understandingaccounting.org/updates/asu-2019-04/). #### Interest Income on Purchased Financial Assets with Credit Deterioration ##### [326-20-35-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-10) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:29.609Z to 2026-09-09T23:49:29.609Z Record version: sha256:8c2fbd2d0d39b323fddf7b21ea4aa1deaad3ca0472d919b8b4db3627a89f92a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not address how a creditor shall recognize interest income. See paragraphs [310-10-35-53A through 35-53C](https://asc.understandingaccounting.org/asc/310/10/#310-10-35-53A) for guidance on recognition of interest income on [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis."). See paragraph [326-20-45-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3) for presentation guidance. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#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 [310-10-35-53A through 35-53B](https://asc.understandingaccounting.org/asc/310/10/#310-10-35-53A) for guidance on recognition of interest income on [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.")and [purchased seasoned loans](https://asc.understandingaccounting.org/glossary/p/#purchased-seasoned-loans "(P) December 16, 2026; (N) December 16, 2026 326-10-65-7 Paragraphs 326-20-30-16326-20-30-17326-20-30-18 define the term purchased seasoned loans."). See paragraph [310-10-35-53C](https://asc.understandingaccounting.org/asc/310/10/#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](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3) for presentation guidance. Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:eca63ac5ec1277eea7f92e60f0d8be857b793b3407e82c917ab8220a6e3d2196 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/326/20/#45-other-presentation-matters) SEC content: no ##### [326-20-45-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:fd5dd326b99653553f8e2e278106a4521cda14ac33464ae0d5ac334a117b8455 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") measured at amortized cost within the scope of this Subtopic, an entity shall separately present on the statement of financial position, the allowance for credit losses that is deducted from the asset's [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."). ##### [326-20-45-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:fdef14e2d901bcc8c1ea1505338e223047e2051ee6c1d8352a8a76b100335435 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For off-balance-sheet credit exposures within the scope of this Subtopic, an entity shall present the estimate of expected credit losses on the statement of financial position as a liability. The liability for credit losses for off-balance-sheet financial instruments shall be reduced in the period in which the off-balance-sheet financial instruments expire, result in the recognition of a financial asset, or are otherwise settled. An estimate of expected credit losses on a financial instrument with off-balance-sheet risk shall be recorded separate from the allowance for credit losses related to a recognized financial instrument. ##### [326-20-45-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:3ac37f96644b2cb71322b38949db29b3b4e819cfae00f0f52804c28c10fd4546 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a discounted cash flow approach is used to estimate expected credit losses, the change in present value from one reporting period to the next may result not only from the passage of time but also from changes in estimates of the timing or amount of expected future cash flows. An entity that measures credit losses based on a discounted cash flow approach is permitted to report the entire change in present value as credit loss expense (or reversal of credit loss expense). Alternatively, an entity may report the change in present value attributable to the passage of time as interest income. See paragraph [326-20-50-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12) for a disclosure requirement applicable to entities that choose the latter alternative and report changes in present value attributable to the passage of time as interest income. ##### [326-20-45-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:82d40cfd697e4eba1bf3450373a866b55da87888699762e137bd8262b545c258 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") of the collateral of a collateral-dependent financial asset may change from one reporting period to the next. Changes in the fair value of the collateral shall be reported as credit loss expense or a reversal of credit loss expense when the guidance in paragraphs [326-20-35-4 through 35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-4) is applied. ##### [326-20-45-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-5) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:32.872Z to 2026-09-09T23:49:32.872Z Record version: sha256:0147b673d63d123e3a049ffb7c3fb75de09acad13743d3ecff5186f724ea5013 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may make an accounting policy election, at the class of financing receivable or major security-type level, to present separately on the statement of financial position or within another statement of financial position line item the accrued interest receivable balance, net of the allowance for credit losses (if any). An entity that presents the accrued interest receivable balance, net of the allowance for credit losses (if any), within another statement of financial position line item shall apply the disclosure requirements in paragraph [326-20-50-3A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3A). Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)An entity may make an accounting policy election, at the [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") or major security-type level, to present separately on the statement of financial position or within another statement of financial position line item the accrued interest receivable balance, net of the allowance for credit losses (if any). An entity that presents the accrued interest receivable balance, net of the allowance for credit losses (if any), within another statement of financial position line item shall apply the disclosure requirements in paragraph [326-20-50-3A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3A). Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:d62153f38e307d386d59559f0ce9f8df4906db1dacacaafd83c3fff480a149bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/326/20/#50-disclosure) SEC content: no ##### [326-20-50-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:3940de5c83f48fcedd95d6c27bacff68c8afa311d839aa5078c17700b56ec8d4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For instruments within the scope of this Subtopic, this Section provides the following disclosure guidance on credit risk and the measurement of expected credit losses: 1. a Credit quality information 2. b Allowance for credit losses 3. c Past-due status 4. d Nonaccrual status 5. e [Purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") 6. f Collateral-dependent [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") 7. g Off-balance-sheet credit exposures. ##### [326-20-50-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:be799eb0ea3dbd7a15528af94bd3bcfd65fc88b016074fd69cbe176e64a6a5e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosure guidance in this Section should enable a user of the financial statements to understand the following: 1. a The credit risk inherent in a portfolio and how management monitors the credit quality of the portfolio 2. b Management's estimate of expected credit losses 3. c Changes in the estimate of expected credit losses that have taken place during the period. ##### [326-20-50-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:3ba98de8c5361f8d571d17d2c94bc1d9b69d5463968b33657b8c18aa35252fa7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For [financing receivables](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities)."), the disclosure guidance in this Subtopic requires an entity to provide information by either [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") or [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3."). Net investment in leases are within the scope of this Subtopic, and the disclosure requirements for financing receivables shall be applied to net investment in leases (including the unguaranteed residual asset). For held-to-maturity [debt securities](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."), the disclosure guidance in this Subtopic requires an entity to provide information by major security type. Paragraphs [326-20-55-10 through 55-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-10) provide implementation guidance about the terms _portfolio segment_ and _class of financing receivable_. When disclosing information, an entity shall determine, in light of the facts and circumstances, how much detail it must provide to satisfy the disclosure requirements in this Section. An entity must strike a balance between not obscuring important information as a result of too much aggregation and not overburdening financial statements with excessive detail that may not assist a financial statement user in understanding the entity's financial assets and allowance for credit losses. For example, an entity should not obscure important information by including it with a large amount of insignificant detail. Similarly, an entity should not disclose information that is so aggregated that it obscures important differences between the different types of financial assets and associated risks. ##### [326-20-50-3A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3A) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:a7d515e12317846d09bded49eb5678c3b6b985e21bf62447145df6514280ea82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes an accounting policy election to present the accrued interest receivable balance within another statement of financial position line item as described in paragraph [326-20-45-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-5) shall disclose the amount of accrued interest, net of the allowance for credit losses (if any), and shall disclose in which line item on the statement of financial position that amount is presented. ##### [326-20-50-3B](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3B) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:47e6512cf516dd00f5a54fa7f08c17f08df862a5a04f08509fb1ac89de7259f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a practical expedient, an entity may exclude the accrued interest receivable balance that is included in the amortized cost basis of financing receivables and held-to-maturity securities for the purposes of the disclosure requirements in paragraphs [326-20-50-4 through 50-22](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4) . If an entity applies this practical expedient, it shall disclose the total amount of accrued interest excluded from the disclosed amortized cost basis. ##### [326-20-50-3C](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3C) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:b1f57d9bdc66600fd60bdbe9b077ce934460821cab3a3d896c0897634d493600 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes the accounting policy election in paragraph [326-20-30-5A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5A) shall disclose its accounting policy not to measure an allowance for credit losses for accrued interest receivables. The accounting policy shall include information about what time period or periods, at the class of financing receivable or major security-type level, are considered timely. ##### [326-20-50-3D](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-3D) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:e846e5171bd44b5212b4bf04e9e105f7ce254935c026a444e21f2f1afdb8321f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes the accounting policy election in paragraph [326-20-35-8A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8A) shall disclose its accounting policy to write off accrued interest receivables by reversing interest income or recognizing credit loss expense or a combination of both. The entity also shall disclose the amount of accrued interest receivables written off by reversing interest income by portfolio segment or major security type. #### Credit Quality Information ##### [326-20-50-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:a92a25a849f8775e68a3ec29c87b7210ae1af346c84ca8402f3144de06a5a609 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall provide information that enables a financial statement user to do both of the following: 1. a Understand how management monitors the credit quality of its [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") 2. b Assess the quantitative and qualitative risks arising from the credit quality of its financial assets. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall provide information that enables a financial statement user to do both of the following: 1. a Understand how management monitors the credit quality of its [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") 2. b Assess the quantitative and qualitative risks arising from the credit quality of its financial assets. ##### [326-20-50-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-5) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:921da6da01607379f539e7c242a5e29a007cac32d593874067cc337aef2a5cc9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objectives in paragraph [326-20-50-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4), an entity shall provide quantitative and qualitative information by [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type about the credit quality of financial assets within the scope of this Subtopic (excluding off-balance-sheet credit exposures and repurchase agreements and securities lending agreements within the scope of Topic 860), including all of the following: 1. a A description of the [credit quality indicator(s)](https://asc.understandingaccounting.org/glossary/c/#credit-quality-indicator "A statistic about the credit quality of a financial asset.") 2. b 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."), by credit quality indicator 3. c For each credit quality indicator, the date or range of dates in which the information was last updated for that credit quality indicator. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To meet the objectives in paragraph [326-20-50-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4), an entity shall provide quantitative and qualitative information in interim and annual reporting periods by [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type about the credit quality of financial assets within the scope of this Subtopic (excluding off-balance-sheet credit exposures and repurchase agreements and securities lending agreements within the scope of Topic 860), including all of the following: 1. a A description of the [credit quality indicator(s)](https://asc.understandingaccounting.org/glossary/c/#credit-quality-indicator "A statistic about the credit quality of a financial asset.") 2. b 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."), by credit quality indicator 3. c For each credit quality indicator, the date or range of dates in which the information was last updated for that credit quality indicator. ##### [326-20-50-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:fcf5560844a80f7d63483cb2bf17ce78cd3f3c39db987cd8f162a9d101e9417d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When disclosing credit quality indicators of [financing receivables](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") and net investment in leases (except for [reinsurance recoverables](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") and funded or unfunded amounts of [line-of-credit arrangements](https://asc.understandingaccounting.org/glossary/l/#line-of-credit-arrangement "A line-of-credit or revolving-debt arrangement is an agreement that provides the borrower with the option to make multiple borrowings up to a specified maximum amount, to repay portions of previous borrowings, and to then reborrow under the same contract. Line-of-credit and revolving-debt arrangements may include both amounts drawn by the debtor (a debt instrument) and a commitment by the creditor to make additional amounts available to the debtor under predefined terms (a loan commitment)."), such as credit cards), a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.") shall present 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.") within each credit quality indicator by year of origination (that is, vintage year). For purchased financing receivables and net investment in leases, an entity shall use the initial date of issuance to determine the year of origination, not the date of acquisition. For origination years before the fifth annual period, a public business entity may present the amortized cost basis of financing receivables and net investments in leases in the aggregate. For interim-period disclosures, the current year-to-date originations in the current reporting period are considered to be the current-period originations. A public business entity shall present the gross writeoffs recorded in the current period, on a current year-to-date basis, for financing receivables and net investments in leases by origination year. For origination years before the fifth annual period, a public business entity may present the gross writeoffs in the current period for financing receivables and net investments in leases in the aggregate. The requirement to present the amortized cost basis within each credit quality indicator by year of origination is not required for an entity that is not a public business entity. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)When disclosing credit quality indicators of [financing receivables](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") and net investment in leases (except for [reinsurance recoverables](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") and funded or unfunded amounts of [line-of-credit arrangements](https://asc.understandingaccounting.org/glossary/l/#line-of-credit-arrangement "A line-of-credit or revolving-debt arrangement is an agreement that provides the borrower with the option to make multiple borrowings up to a specified maximum amount, to repay portions of previous borrowings, and to then reborrow under the same contract. Line-of-credit and revolving-debt arrangements may include both amounts drawn by the debtor (a debt instrument) and a commitment by the creditor to make additional amounts available to the debtor under predefined terms (a loan commitment)."), such as credit cards), a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC.") shall present 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.") within each credit quality indicator by year of origination (that is, vintage year) in interim and annual reporting periods. For purchased financing receivables and net investment in leases, an entity shall use the initial date of issuance to determine the year of origination, not the date of acquisition. For origination years before the fifth annual period, a public business entity may present the amortized cost basis of financing receivables and net investments in leases in the aggregate. For interim-period disclosures, the current year-to-date originations in the current reporting period are considered to be the current-period originations. A public business entity shall present the gross writeoffs recorded in the current period, on a current year-to-date basis, for financing receivables and net investments in leases by origination year. For origination years before the fifth annual period, a public business entity may present the gross writeoffs in the current period for financing receivables and net investments in leases in the aggregate. The requirement to present the amortized cost basis within each credit quality indicator by year of origination is not required for an entity that is not a public business entity. ##### [326-20-50-6A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:870a705beea82d8c7cec13aab1a76c3a67b0c42c138411f42f27149b03e95051 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purpose of the disclosure requirement in paragraph [326-20-50-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6), a public business entity shall present the amortized cost basis of line-of-credit arrangements that are converted to term loans in a separate column (see Example 15 in paragraph [326-20-55-79](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-79)). A public business entity shall disclose in each reporting period, by class of financing receivable, the amount of line-of-credit arrangements that are converted to term loans in each reporting period and the total of these financing receivables that were written off in the current reporting period in accordance with paragraph [326-20-50-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For the purpose of the disclosure requirement in paragraph [326-20-50-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6), a public business entity shall present the amortized cost basis of line-of-credit arrangements that are converted to term loans in a separate column (see Example 15 in paragraph [326-20-55-79](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-79)). A public business entity shall disclose in each interim and annual reporting period, by class of financing receivable, the amount of line-of-credit arrangements that are converted to term loans in each reporting period and the total of these financing receivables that were written off in the current reporting period in accordance with paragraph [326-20-50-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6). ##### [326-20-50-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-7) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:caf80a817720a14b9eaa89c6287e7c0e6e92a8a2644cce8a459b264f39073356 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Except as provided in paragraph [326-20-50-6A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6A), a public business entity shall use the guidance in paragraphs [310-20-35-9 through 35-11](https://asc.understandingaccounting.org/asc/310/20/#310-20-35-9) when determining whether a modification, extension, or renewal of a financing receivable should be presented as a current-period origination. A public business entity shall use the guidance in paragraphs [842-10-25-8 through 25-9](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-8) when determining whether a lease modification should be presented as a current-period origination. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)Except as provided in paragraph [326-20-50-6A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-6A), for interim and annual reporting periods, a public business entity shall use the guidance in paragraphs [310-20-35-9 through 35-11](https://asc.understandingaccounting.org/asc/310/20/#310-20-35-9) when determining whether a modification, extension, or renewal of a financing receivable should be presented as a current-period origination. A public business entity shall use the guidance in paragraphs [842-10-25-8 through 25-9](https://asc.understandingaccounting.org/asc/842/10/#842-10-25-8) when determining whether a lease modification should be presented as a current-period origination. ##### [326-20-50-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-8) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:2d0808087c8406ebe86c0bb821f2e57de3c4dc11e47fb6ca8c129203f6bbef05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity discloses internal risk ratings, then the entity shall provide qualitative information on how those internal risk ratings relate to the likelihood of loss. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)If an entity discloses internal risk ratings, then the entity shall provide qualitative information in interim and annual reporting periods on how those internal risk ratings relate to the likelihood of loss. ##### [326-20-50-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-9) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:1f95fed23f7b592a56d464987ac24e5e74158132b63a1779e6abf9dadd902497 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The requirements to disclose credit quality indicators in paragraphs [326-20-50-4 through 50-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4) do not apply to receivables measured at the lower of amortized cost basis or fair value, or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)The requirements to disclose credit quality indicators in paragraphs [326-20-50-4 through 50-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-4) for interim and annual reporting periods do not apply to receivables measured at the lower of amortized cost basis or fair value, or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. #### Allowance for Credit Losses ##### [326-20-50-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-10) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:e1e8b868249250f0e60b9acda3d90ba0e94f8b9102a7281987b72850453bc578 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall provide information that enables a financial statement user to do the following: 1. a Understand management's method for developing its allowance for credit losses 2. b Understand the information that management used in developing its current estimate of expected credit losses 3. c Understand the circumstances that caused changes to the allowance for credit losses, thereby affecting the related credit loss expense (or reversal) reported for the period. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity shall provide information that enables a financial statement user to do the following: 1. a Understand management's method for developing its allowance for credit losses 2. b Understand the information that management used in developing its current estimate of expected credit losses 3. c Understand the circumstances that caused changes to the allowance for credit losses, thereby affecting the related credit loss expense (or reversal) reported for the period. ##### [326-20-50-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-11) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:4ec834fe92b99fb4873bab76a9e1e2a3d766e6e902563b5f8ac371614db87ef8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the objectives in paragraph [326-20-50-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-10), an entity shall disclose all of the following by [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") and major security type: 1. a A description of how expected loss estimates are developed 2. b A description of the entity's accounting policies and methodology to estimate the allowance for credit losses, as well as a discussion of the factors that influenced management's current estimate of expected credit losses, including: 1. 1 Past events 2. 2 Current conditions 3. 3 Reasonable and supportable forecasts about the future. 3. c A discussion of risk characteristics relevant to each portfolio segment 4. d A discussion of the changes in the factors that influenced management's current estimate of expected credit losses and the reasons for those changes (for example, changes in portfolio composition, underwriting practices, and significant events or conditions that affect the current estimate but were not contemplated or relevant during a previous period) 5. e Identification of changes to the entity's accounting policies, changes to the methodology from the prior period, its rationale for those changes, and the quantitative effect of those changes 6. f Reasons for significant changes in the amount of writeoffs, if applicable 7. g A discussion of the reversion method applied for periods beyond the reasonable and supportable forecast period 8. h The amount of any significant purchases of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") during each reporting period 9. i The amount of any significant sales of financial assets or reclassifications of [loans](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.") held for sale during each reporting period. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To meet the objectives in paragraph [326-20-50-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-10), an entity shall disclose all of the following by [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") and major security type in interim and annual reporting periods: 1. a A description of how expected loss estimates are developed 2. b A description of the entity's accounting policies and methodology to estimate the allowance for credit losses, as well as a discussion of the factors that influenced management's current estimate of expected credit losses, including: 1. 1 Past events 2. 2 Current conditions 3. 3 Reasonable and supportable forecasts about the future. 3. c A discussion of risk characteristics relevant to each portfolio segment 4. d A discussion of the changes in the factors that influenced management's current estimate of expected credit losses and the reasons for those changes (for example, changes in portfolio composition, underwriting practices, and significant events or conditions that affect the current estimate but were not contemplated or relevant during a previous period) 5. e Identification of changes to the entity's accounting policies, changes to the methodology from the prior period, its rationale for those changes, and the quantitative effect of those changes 6. f Reasons for significant changes in the amount of writeoffs, if applicable 7. g A discussion of the reversion method applied for periods beyond the reasonable and supportable forecast period 8. h The amount of any significant purchases of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") during each reporting period 9. i The amount of any significant sales of financial assets or reclassifications of [loans](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.") held for sale during each reporting period. ##### [326-20-50-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:33885c8844bd0203cd60720d25a26db29187c15ce3c3b7bbcbd9280bd1a3a62d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [326-20-45-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3) explains that a creditor that measures expected credit losses based on a discounted cash flow method is permitted to report the entire change in present value as credit loss expense (or reversal of credit loss expense) but also may report the change in present value attributable to the passage of time as interest income. Creditors that choose the latter alternative shall disclose the amount recorded to interest income that represents the change in present value attributable to the passage of time. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)Paragraph [326-20-45-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3) explains that a creditor that measures expected credit losses based on a discounted cash flow method is permitted to report the entire change in present value as credit loss expense (or reversal of credit loss expense) but also may report the change in present value attributable to the passage of time as interest income. Creditors that choose the latter alternative shall disclose the amount recorded to interest income that represents the change in present value attributable to the passage of time in interim and annual reporting periods. ##### [326-20-50-12A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:8df79e086d071135f2dff2fc961d00cf10711b13fe5396c8e1cf15cccc01b828 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)An entity shall disclose that it has elected the practical expedient described in paragraphs [326-20-30-10C through 30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) or, for an entity other than a public business entity, that it has elected both the practical expedient and the accounting policy election described in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) . ##### [326-20-50-12B](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:5942a661f945c93b1648e4b29d7297b6e28913abbd449bb7996dcc705a660c85 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)In annual reporting periods, an entity other than a public business entity that has elected the accounting policy described in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) shall disclose the date through which it has considered subsequent collection activity. ##### [326-20-50-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-13) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:8347b87a10f01627b4166abb9451572e11b5a71147caf5471799e4e7c4b6dc8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Furthermore, to enable a financial statement user to understand the activity in the allowance for credit losses for each period, an entity shall separately provide by [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") and major security type the quantitative disclosures of the activity in the allowance for credit losses for [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") within the scope of this Subtopic, including all of the following: 1. a The beginning balance in the allowance for credit losses 2. b Current-period provision for expected credit losses 3. c The initial allowance for credit losses recognized on financial assets accounted for as [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") (including beneficial interests that meet the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)), if applicable 4. d Writeoffs charged against the allowance 5. e Recoveries collected 6. f The ending balance in the allowance for credit losses. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [220-40-65-1](https://asc.understandingaccounting.org/asc/220/40/#220-40-65-1)Furthermore, to enable a financial statement user to understand the activity in the allowance for credit losses for each period, an entity shall separately provide by [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") and major security type the quantitative disclosures of the activity in the allowance for credit losses for [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") within the scope of this Subtopic, including all of the following: 1. a The beginning balance in the allowance for credit losses 2. b Current-period provision for expected credit losses 3. c The initial allowance for credit losses recognized on financial assets accounted for as [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") (including beneficial interests that meet the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)), if applicable 4. d Writeoffs charged against the allowance 5. e Recoveries collected 6. f The ending balance in the allowance for credit losses. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)Furthermore, to enable a financial statement user to understand the activity in the allowance for credit losses for each period, an entity shall separately provide by [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10.") and major security type the quantitative disclosures of the activity in the allowance for credit losses for [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") within the scope of this Subtopic, including all of the following in interim and annual reporting periods: 1. a The beginning balance in the allowance for credit losses 2. b Current-period provision for expected credit losses 3. c The initial allowance for credit losses recognized on financial assets accounted for as [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") (including beneficial interests that meet the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)), if applicable 4. d Writeoffs charged against the allowance 5. e Recoveries collected 6. f The ending balance in the allowance for credit losses. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. #### Past Due Status ##### [326-20-50-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-14) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:254af5501a4d9fac3d718d095c12c29393acf6f14c33831323b2141b19e5d687 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To enable a financial statement user to understand the extent of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") that are past due, an entity shall provide an aging analysis of 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.") for financial assets that are past due as of the reporting date, disaggregated by [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type. An entity also shall disclose when it considers a financial asset to be past due. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To enable a financial statement user to understand the extent of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") that are past due, an entity shall provide an aging analysis of 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.") for financial assets that are past due as of the reporting date, disaggregated by [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type. An entity also shall disclose when it considers a financial asset to be past due. The disclosures in this paragraph are required in interim and annual reporting periods. ##### [326-20-50-15](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-15) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:b47c52a7bb6c14bbf534f097c7bc6e83b25880baeecc34e56f300c67f6401d2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The requirements to disclose past-due status in paragraph [326-20-50-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-14) do not apply to receivables measured at the lower of amortized cost basis or [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."), or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)The requirements to disclose past-due status in paragraph [326-20-50-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-14)in interim and annual reporting periods do not apply to receivables measured at the lower of amortized cost basis or [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."), or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. #### Nonaccrual Status ##### [326-20-50-16](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-16) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:d002e5aabeb1d7e20ad66d2f57fe48dae4fed25944a5702c3e904556c7b6f994 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To enable a financial statement user to understand the credit risk and interest income recognized on [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") on nonaccrual status, an entity shall disclose all of the following, disaggregated by class of [financing receivable](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") and major security type: 1. a 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.") of financial assets on nonaccrual status as of the beginning of the reporting period and the end of the reporting period 2. b The amount of interest income recognized during the period on nonaccrual financial assets 3. c The amortized cost basis of financial assets that are 90 days or more past due, but are not on nonaccrual status as of the reporting date 4. d The amortized cost basis of financial assets on nonaccrual status for which there is no related allowance for credit losses as of the reporting date. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)To enable a financial statement user to understand the credit risk and interest income recognized on [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") on nonaccrual status, an entity shall disclose all of the following, disaggregated by class of [financing receivable](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") and major security type, in interim and annual reporting periods: 1. a 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.") of financial assets on nonaccrual status as of the beginning of the reporting period and the end of the reporting period 2. b The amount of interest income recognized during the period on nonaccrual financial assets 3. c The amortized cost basis of financial assets that are 90 days or more past due, but are not on nonaccrual status as of the reporting date 4. d The amortized cost basis of financial assets on nonaccrual status for which there is no related allowance for credit losses as of the reporting date. ##### [326-20-50-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-17) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:3d0d76384ece11b2899cd34914bfa07f312aa5b49982a31fe4100d42a322ce4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's summary of significant accounting policies for financial assets within the scope of this Subtopic shall include all of the following: 1. a Nonaccrual policies, including the policies for discontinuing accrual of interest, recording payments received on nonaccrual assets (including the cost recovery method, cash basis method, or some combination of those methods), and resuming accrual of interest, if applicable 2. b The policy for determining past-due or delinquency status 3. c The policy for recognizing writeoffs within the allowance for credit losses. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, an entity's summary of significant accounting policies for financial assets within the scope of this Subtopic shall include all of the following: 1. a Nonaccrual policies, including the policies for discontinuing accrual of interest, recording payments received on nonaccrual assets (including the cost recovery method, cash basis method, or some combination of those methods), and resuming accrual of interest, if applicable 2. b The policy for determining past-due or delinquency status 3. c The policy for recognizing writeoffs within the allowance for credit losses. ##### [326-20-50-18](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-18) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:dfc0a7f8628cacec9e74d7549369a34b77d3d9efc1c5a742955e14800665ba1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The requirements to disclose nonaccrual status in paragraphs [326-20-50-16 through 50-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-16) do not apply to receivables measured at lower of amortized cost basis or fair value, or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)The requirements to disclose nonaccrual status in paragraphs [326-20-50-16 through 50-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-16) in interim and annual reporting periods do not apply to receivables measured at lower of amortized cost basis or fair value, or trade receivables due in one year or less, except for credit card receivables, that result from revenue transactions within the scope of Topic 605 on revenue recognition or Topic 606 on revenue from contracts with customers. #### Purchased Financial Assets with Credit Deterioration ##### [326-20-50-19](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:0ab7cfadb901709635708a254c8147eec4483c1fcb5254c643a30d9c8f6f24b5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent an entity acquired [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") during the current reporting period, an entity shall provide a reconciliation of the difference between the purchase price of the [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") and the par value of the assets, including: 1. a The purchase price 2. b The allowance for credit losses at the acquisition date based on the acquirer's assessment 3. c The discount (or premium) attributable to other factors 4. d The par value. #### Collateral-Dependent Financial Assets ##### [326-20-50-20](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:38d97501217cc82287e700b42fd94204dceb7f5911ac2e4af12e16ba85b96302 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a [financial asset](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") for which the repayment (on the basis of an entity's assessment as of the reporting date) is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, an entity shall describe the type of collateral by [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type. The entity also shall qualitatively describe, by class of financing receivable and major security type, the extent to which collateral secures its collateral-dependent financial assets, and significant changes in the extent to which collateral secures its collateral-dependent financial assets, whether because of a general deterioration or some other reason. #### Off-Balance-Sheet Credit Exposures ##### [326-20-50-21](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:c6baa7f89bde4c24470ed90adc22fe209f41d1bd69e4172a891bc29d6991c5ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition to disclosures required by other Topics, an entity shall disclose a description of the accounting policies and methodology the entity used to estimate its liability for off-balance-sheet credit exposures and related charges for those credit exposures. Such a description shall identify the factors that influenced management's judgment (for example, historical losses, existing economic conditions, and reasonable and supportable forecasts) and a discussion of risk elements relevant to particular categories of financial instruments. ##### [326-20-50-22](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:37.048Z to 2026-09-09T23:49:37.048Z Record version: sha256:e3d89da392721139341f4c229b35b51f7489cdcc8665dd475f5e21bc947e539f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Off-balance-sheet credit exposures refers to credit exposures on off-balance-sheet [loan commitments](https://asc.understandingaccounting.org/glossary/l/#loan-commitment "Loan commitments are legally binding commitments to extend credit to a counterparty under certain prespecified terms and conditions. They have fixed expiration dates and may either be fixed-rate or variable-rate. Loan commitments can be either of the following: Revolving (in which the amount of the overall commitment is reestablished upon repayment of previously drawn amounts) Nonrevolving (in which the amount of the overall commitment is not reestablished upon repayment of previously drawn amounts)."), [standby letters of credit](https://asc.understandingaccounting.org/glossary/s/#standby-letter-of-credit "A letter of credit (or similar arrangement however named or designated) that represents an obligation to the beneficiary on the part of the issuer for any of the following: To repay money borrowed by or advanced to or for the account of the account party To make payment on account of any evidence of indebtedness undertaken by the account party To make payment on account of any default by the account party in the performance of an obligation. A standby letter of credit would not include the following: Commercial letters of credit and similar instruments where the issuing bank expects the beneficiary to draw upon the issuer and which do not guarantee payment of a money obligation A guarantee or similar obligation issued by a foreign branch in accordance with and subject to the limitations of Regulation M of the Federal Reserve Board."), financial guarantees not accounted for as insurance, and other similar instruments, except for instruments within the scope of Topic 815. Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:89d4883999115c264a8c3bdb31125e2548b973083dad3a1845bad179df269494 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/326/20/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [326-20-55-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:b82f418b6931db2dc0c8f9c0a1f10569a7089292743c48435543bb4c4745369d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides implementation guidance for management's estimate of expected credit losses on [financial asset(s)](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."). This Section is organized as follows: 1. a Information considered when estimating expected credit losses 2. b Developing an estimate of expected credit losses 3. c Net investment in leases 4. d Effect of a fair value hedge on the discount rate when using a discounted cash flow model. ##### [326-20-55-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f2d6c94caedec57a050532decffd202a3392620f9db5c5558eddb67ecb484cda Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining its estimate of expected credit losses, an entity should evaluate information related to the borrower's creditworthiness, changes in its lending strategies and underwriting practices, and the current and forecasted direction of the economic and business environment. This Subtopic does not specify a particular methodology to be applied by an entity for determining historical credit loss experience. That methodology may vary depending on the size of the entity, the range of the entity's activities, the nature of the entity's [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity."), and other factors. ##### [326-20-55-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:4b478cec33ae11da49cf68fe3b56ee1055fe08e380ad3305d2e83e236c3a28b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Historical loss information generally provides a basis for an entity's assessment of expected credit losses. An entity may use historical periods that represent management's expectations for future credit losses. An entity also may elect to use other historical loss periods, adjusted for current conditions, and other reasonable and supportable forecasts. When determining historical loss information in estimating expected credit losses, the information about historical credit loss data, after adjustments for current conditions and reasonable and supportable forecasts, should be applied to pools that are defined in a manner that is consistent with the pools for which the historical credit loss experience was observed. ##### [326-20-55-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:ece9da37c502708b65836180a451a5c542c32fd8d93a11018ed8675f746ea1e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because historical experience may not fully reflect an entity's expectations about the future, management should adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. In making this determination, management should consider characteristics of the financial assets that are relevant in the circumstances. To adjust historical credit loss information for current conditions and reasonable and supportable forecasts, an entity should consider significant factors that are relevant to determining the expected collectibility. Examples of factors an entity may consider include any of the following, depending on the nature of the asset (not all of these may be relevant to every situation, and other factors not on the list may be relevant): 1. a The borrower's financial condition, credit rating, credit score, asset quality, or business prospects 2. b The borrower's ability to make scheduled interest or principal payments 3. c The remaining payment terms of the financial asset(s) 4. d The remaining time to maturity and the timing and extent of prepayments on the financial asset(s) 5. e The nature and volume of the entity's financial asset(s) 6. f The volume and severity of past due financial asset(s) and the volume and severity of adversely classified or rated financial asset(s) 7. g The value of underlying collateral on financial assets in which the collateral-dependent practical expedient has not been utilized 8. h The entity's lending policies and procedures, including changes in lending strategies, underwriting standards, collection, writeoff, and recovery practices, as well as knowledge of the borrower's operations or the borrower's standing in the community 9. i The quality of the entity's credit review system 10. j The experience, ability, and depth of the entity's management, lending staff, and other relevant staff 11. k The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: 1. 1 Regulatory, legal, or technological environment to which the entity has exposure 2. 2 Changes and expected changes in the general market condition of either the geographical area or the industry to which the entity has exposure 3. 3 Changes and expected changes in international, national, regional, and local economic and business conditions and developments in which the entity operates, including the condition and expected condition of various market segments. ##### [326-20-55-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:ff5e494273d2f762a3437815ee11ba047bbc289c181891a67728eed74fea5555 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In evaluating [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") on a collective (pool) basis, an entity should aggregate financial assets on the basis of similar risk characteristics, which may include any one or a combination of the following (the following list is not intended to be all inclusive): 1. a Internal or external (third-party) credit score or credit ratings 2. b Risk ratings or classification 3. c Financial asset type 4. d Collateral type 5. e Size 6. f [Effective interest rate](https://asc.understandingaccounting.org/glossary/e/#effective-interest-rate "The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition.") 7. g Term 8. h Geographical location 9. i Industry of the borrower 10. j Vintage 11. k Historical or expected credit loss patterns 12. l Reasonable and supportable forecast periods. ##### [326-20-55-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:93e88832097512c8e0f6ac36e2c57af2bf5c8a25af475932a5b201cc86d0ff48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimating expected credit losses is highly judgmental and generally will require an entity to make specific judgments. Those judgments may include any of the following: 1. a The definition of default for default-based statistics 2. b The approach to measuring the historical loss amount for loss-rate statistics, including whether the amount is simply based on the amortized cost amount written off and whether there should be adjustments to historical credit losses (if any) to reflect the entity's policies for recognizing accrued interest 3. c The approach to determine the appropriate historical period for estimating expected credit loss statistics 4. d The approach to adjusting historical credit loss information to reflect current conditions and reasonable and supportable forecasts that are different from conditions existing in the historical period 5. e The methods of utilizing historical experience 6. f The method of adjusting loss statistics for recoveries 7. g How expected prepayments affect the estimate of expected credit losses 8. h How the entity plans to revert to historical credit loss information for periods beyond which the entity is able to make or obtain reasonable and supportable forecasts of expected credit losses 9. i The assessment of whether a financial asset exhibits risk characteristics similar to other financial assets. ##### [326-20-55-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:eedf56a8a5547561e3ac638001d5aa1b7f107bb6d0b169b748c492ca4763b620 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because of the subjective nature of the estimate, this Subtopic does not require specific approaches when developing the estimate of expected credit losses. Rather, an entity should use judgment to develop estimation techniques that are applied consistently over time and should faithfully estimate the collectibility of the financial assets by applying the principles in this Subtopic. An entity should utilize estimation techniques that are practical and relevant to the circumstance. The method(s) used to estimate expected credit losses may vary on the basis of the type of financial asset, the entity's ability to predict the timing of cash flows, and the information available to the entity. ##### [326-20-55-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d853ae8e311be8f53e2fc83ab0176d37bd459ff7a1aa99141ad06874dcefde21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic requires that an entity recognize an allowance for credit losses on net investment in [leases](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") recognized by a [lessor](https://asc.understandingaccounting.org/glossary/l/#lessor "An entity that enters into a contract to provide the right to use an underlying asset for a period of time in exchange for consideration.") in accordance with Topic 842 on leases. An entity should include the unguaranteed residual asset with the lease receivable, net of any deferred selling profit, if applicable (that is, the net investment in the lease). When measuring expected credit losses on net investment in leases, the [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.") should be used as the contractual term. When measuring expected credit losses on net investment in leases using a discounted cash flow method, the discount rate used in measuring the lease receivable under Topic 842 should be used in place of the [effective interest rate](https://asc.understandingaccounting.org/glossary/e/#effective-interest-rate "The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition."). ##### [326-20-55-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d03ad1c63d33ceb87d655e67760e5b226bfba4f3db8299514bd3e26b9112e906 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 815-25-35 implicitly affects the measurement of credit losses under this Topic by requiring the present value of expected future cash flows to be discounted by the new [effective interest rate](https://asc.understandingaccounting.org/glossary/e/#effective-interest-rate "The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition.") based on the adjusted [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.") in a hedged [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."). When the amortized cost basis of a loan has been adjusted under fair value hedge accounting, the effective interest rate is the discount rate that equates the present value of the loan's future cash flows with that adjusted amortized cost basis. The adjustment under fair value hedge accounting of the loan's carrying amount for changes in fair value attributable to the hedged risk under Section 815-25-35 shall be considered to be an adjustment of the loan's amortized cost basis. Paragraph [815-25-35-11](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-11) explains that the loan's original effective interest rate becomes irrelevant once the recorded amount of the loan is adjusted for any changes in its fair value. Paragraph [815-25-35-11](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-11) also explains that an entity should not adjust the amortized cost basis or the discount rate of the individual assets or individual beneficial interest included in the closed portfolio for a basis adjustment that is maintained on the closed portfolio basis in accordance with paragraph [815-25-35-1(c)](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1). ##### [326-20-55-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:edc073b3db8961bbd95f52376affd5bef5291ff1965a8e692a5bf28f4a1d6838 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses the meaning of the term _portfolio segment_. All of the following are examples of portfolio segments: 1. a Type of [financing receivable](https://asc.understandingaccounting.org/glossary/f/#financing-receivable "A financing arrangement that has both of the following characteristics: It represents a contractual right to receive money in either of the following ways: On demand On fixed or determinable dates. It is recognized as an asset in the entity's statement of financial position. See paragraphs 310-10-55-13310-10-55-14310-10-55-15 for more information on the definition of financing receivable, including a list of items that are excluded from the definition (for example, debt securities).") 2. b Industry sector of the borrower 3. c Risk rating. ##### [326-20-55-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:614f0e0d6b47043e80f6a1fabcd0b22dedd60749c5abaa337e1c1b8a13a65944 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses application of the term _[class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.")_. An entity should base its principal determination of class of financing receivable by disaggregating to the level that the entity uses when assessing and monitoring the risk and performance of the portfolio for various types of financing receivables. In its assessment, the entity should consider the risk characteristics of the financing receivables. ##### [326-20-55-12](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:cd71023dbdad320f9b929370c752de82047eef613a4a96b3e90eb4e36e1b0189 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining the appropriate level of its internal reporting to use as a basis for disclosure, an entity should consider the level of detail needed by a user to understand the risks inherent in the entity's financing receivables. An entity could further disaggregate its financing receivables portfolio by considering numerous factors. Examples of factors that the entity should consider include any of the following: 1. a Categorization of borrowers, such as any of the following: 1. 1 Commercial loan borrowers 2. 2 Consumer loan borrowers 3. 3 [Related party](https://asc.understandingaccounting.org/glossary/r/#related-parties "Related parties include: Affiliates of the entity Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management Principal owners of the entity and members of their immediate families Management of the entity and members of their immediate families Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.") borrowers. 2. b Type of financing receivable, such as any of the following: 1. 1 Mortgage loans 2. 2 Credit card loans 3. 3 Interest-only loans 4. 4 Finance leases. 3. c Industry sector, such as either of the following: 1. 1 Real estate 2. 2 Mining. 4. d Type of collateral, such as any of the following: 1. 1 Residential property 2. 2 Commercial property 3. 3 Government-guaranteed collateral 4. 4 Uncollateralized (unsecured) financing receivables. 5. e Geographic distribution, including both of the following: 1. 1 Domestic 2. 2 International. ##### [326-20-55-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:01a18cef4c254466b313dc05000775f1e8f95c3406095817821379a1da087ad3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity also may consider factors related to concentrations of credit risk as discussed in Section 825-10-55. ##### [326-20-55-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3d0017ad5079d5cce9b8881837367acb2058874b21889f47f8877bcc49feebb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Classes of financing receivables generally are a disaggregation of a [portfolio segment](https://asc.understandingaccounting.org/glossary/p/#portfolio-segment "The level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. See paragraphs 326-20-50-3 and 326-20-55-10."). For determining the appropriate classes of financing receivables that are related to a portfolio segment, the portfolio segment is the starting point with further disaggregation in accordance with the guidance in paragraphs [326-20-55-11 through 55-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-11) . The determination of class for financing receivables that are not related to a portfolio segment (because there is no associated allowance) also should be based on the guidance in those paragraphs. ##### [326-20-55-15](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:05e7352f3a62b3b72dd23aa5a1fd6513c7ee04f2420b7e4bca6cccf519d64dfd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses application of the term _[credit quality indicator](https://asc.understandingaccounting.org/glossary/c/#credit-quality-indicator "A statistic about the credit quality of a financial asset.")_. Examples of credit quality indicators include all of the following: 1. a Consumer credit risk scores 2. b Credit-rating-agency ratings 3. c An entity's internal credit risk grades 4. d Debt-to-value ratios 5. e Collateral 6. f Collection experience 7. g Other internal metrics. ##### [326-20-55-16](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:82b83690b88c241744360333baf6235a13444a4633947695fcbcccdbd1aecee7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity should use judgment in determining the appropriate credit quality indicator for each [class of financing receivable](https://asc.understandingaccounting.org/glossary/c/#class-of-financing-receivable "A group of financing receivables determined on the basis of both of the following:Risk characteristics of the financing receivableAn entity's method for monitoring and assessing credit risk.See paragraphs 326-20-55-11326-20-55-12326-20-55-13326-20-55-14 and 326-20-50-3.") and major security type. As of the balance sheet date, the entity should use the most current information it has obtained for each credit quality indicator. #### Illustrations ##### [326-20-55-17](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-17) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:872c2720de87d77fbfa36cf434e72fb9aec97b8981803b55ba173f001c4a1e6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Examples illustrate certain initial and subsequent measurement guidance in this Subtopic to account for expected credit losses on financial assets: 1. a Example 1: Estimating expected credit losses using a loss-rate approach (collective evaluation) 2. b Example 2: Estimating expected credit losses using a loss-rate approach (individual evaluation) 3. c Example 3: Estimating expected credit losses on a vintage-year basis 4. d Example 4: Estimating expected credit losses using both a collective method and an individual asset method 5. e Example 5: Estimating expected credit losses for trade receivables using an aging schedule 6. f Example 6: Estimating expected credit losses—practical expedient for collateral-dependent financial assets 7. g Example 7: Estimating expected credit losses—practical expedient for financial assets with collateral maintenance provisions 8. h Example 8: Estimating expected credit losses when potential default is greater than zero, but expected nonpayment is zero 9. i Example 9: Recognizing writeoffs and recoveries 10. j Example 10: Applying expected credit losses to unconditionally cancellable loan commitments 11. k Example 11: Identifying purchased financial assets with credit deterioration 12. l Example 12: Recognizing purchased financial assets with credit deterioration 13. m Example 13: Using a loss-rate approach for determining expected credit losses and the discount rate on a purchased financial asset with credit deterioration 14. n Example 14: Using a discounted cash flow approach for determining expected credit losses and the discount rate on a purchased financial asset with credit deterioration 15. o Example 15: Disclosing credit quality indicators of financing receivables by amortized cost basis 16. p Example 16: Disclosing past-due status 17. q Example 17: Identifying similar risk characteristics in reinsurance recoverables 18. r Example 18: Determining the negative allowance for purchased financial assets with credit deterioration with no change in credit conditions 19. s Example 19: Determining the negative allowance for purchased financial assets with credit deterioration after a change in credit conditions. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)The following Examples illustrate certain initial and subsequent measurement guidance in this Subtopic to account for expected credit losses on financial assets: 1. a Example 1: Estimating expected credit losses using a loss-rate approach (collective evaluation) 2. b Example 2: Estimating expected credit losses using a loss-rate approach (individual evaluation) 3. c Example 3: Estimating expected credit losses on a vintage-year basis 4. d Example 4: Estimating expected credit losses using both a collective method and an individual asset method 5. e Example 5: Estimating expected credit losses for trade receivables using an aging schedule 6. ee Example 5A: Practical expedient and accounting policy election for estimating expected credit losses on current accounts receivable and current [contract assets](https://asc.understandingaccounting.org/glossary/c/#contract-asset "An entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity's future performance).") 7. f Example 6: Estimating expected credit losses—practical expedient for collateral-dependent financial assets 8. g Example 7: Estimating expected credit losses—practical expedient for financial assets with collateral maintenance provisions 9. h Example 8: Estimating expected credit losses when potential default is greater than zero, but expected nonpayment is zero 10. i Example 9: Recognizing writeoffs and recoveries 11. j Example 10: Applying expected credit losses to unconditionally cancellable loan commitments 12. k Example 11: Identifying purchased financial assets with credit deterioration 13. l Example 12: Recognizing purchased financial assets with credit deterioration 14. m Example 13: Using a loss-rate approach for determining expected credit losses and the discount rate on a purchased financial asset with credit deterioration 15. n Example 14: Using a discounted cash flow approach for determining expected credit losses and the discount rate on a purchased financial asset with credit deterioration 16. o Example 15: Disclosing credit quality indicators of financing receivables by amortized cost basis 17. p Example 16: Disclosing past-due status 18. q Example 17: Identifying similar risk characteristics in reinsurance recoverables 19. r Example 18: Determining the negative allowance for purchased financial assets with credit deterioration with no change in credit conditions 20. s Example 19: Determining the negative allowance for purchased financial assets with credit deterioration after a change in credit conditions. ##### [326-20-55-18](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:701f8fb7bf7420af9ccd39f4f9e6b1c1101609e49bece6c46dc78c7fb3f55733 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may estimate expected credit losses on a portfolio of loans with similar risk characteristics using a loss-rate approach. ##### [326-20-55-19](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:fe3355a27e7de745dc3ecb6bd941e1c0d7338ac591881958c8003a34480852f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Community Bank A provides 10-year amortizing loans to customers. Community Bank A manages those loans on a collective basis based on similar risk characteristics. The loans within the portfolio were originated over the last 10 years, and the portfolio has an amortized cost basis of $3 million. ##### [326-20-55-20](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d4696dde9c7cd3e86bc42e73b87cc6dbae2a8b68a6dafe72facfa967b61067d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After comparing historical information for similar financial assets with the current and forecasted direction of the economic environment, Community Bank A believes that its most recent 10-year period is a reasonable period on which to base its expected credit-loss-rate calculation after considering the underwriting standards and contractual terms for loans that existed over the historical period in comparison with the current portfolio. Community Bank A's historical lifetime credit loss rate (that is, a rate based on the sum of all credit losses for a similar pool) for the most recent 10-year period is 1.5 percent. The historical credit loss rate already factors in prepayment history, which it expects to remain unchanged. Community Bank A considered whether any adjustments to historical loss information in accordance with paragraph [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) were needed, before considering adjustments for current conditions and reasonable and supportable forecasts, but determined none were necessary. ##### [326-20-55-21](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e3088179e249c4d2aba903061b889ab5210ddacbf9a88aa57c08035d734d781f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accordance with paragraph [326-20-55-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-4), Community Bank A considered significant factors that could affect the expected collectibility of the amortized cost basis of the portfolio and determined that the primary factors are real estate values and unemployment rates. As part of this analysis, Community Bank A observed that real estate values in the community have decreased and the unemployment rate in the community has increased as of the current reporting period date. Based on current conditions and reasonable and supportable forecasts, Community Bank A expects that there will be an additional decrease in real estate values over the next one to two years, and unemployment rates are expected to increase further over the next one to two years. To adjust the historical loss rate to reflect the effects of those differences in current conditions and forecasted changes, Community Bank A estimates a 10-basis-point increase in credit losses incremental to the 1.5 percent historical lifetime loss rate due to the expected decrease in real estate values and a 5-basis-point increase in credit losses incremental to the historical lifetime loss rate due to expected deterioration in unemployment rates. Management estimates the incremental 15-basis-point increase based on its knowledge of historical loss information during past years in which there were similar trends in real estate values and unemployment rates. Management is unable to support its estimate of expectations for real estate values and unemployment rates beyond the reasonable and supportable forecast period. Under this loss-rate method, the incremental credit losses for the current conditions and reasonable and supportable forecast (the 15 basis points) is added to the 1.5 percent rate that serves as the basis for the expected credit loss rate. No further reversion adjustments are needed because Community Bank A has applied a 1.65 percent loss rate where it has immediately reverted into historical losses reflective of the contractual term in accordance with paragraphs [326-20-30-8 through 30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) . This approach reflects an immediate reversion technique for the loss-rate method. ##### [326-20-55-22](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f13128e5ccd7dd821a22531860d5e360920040dae41a04c1cb32002e0e69f728 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The expected loss rate to apply to the amortized cost basis of the loan portfolio would be 1.65 percent, the sum of the historical loss rate of 1.5 percent and the adjustment for the current conditions and reasonable and supportable forecast of 15 basis points. The allowance for expected credit losses at the reporting date would be $49,500. ##### [326-20-55-23](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:b2bb18d3439a6040795c4173b69c58e756f46b6e52a10ca74a64c4b4ac0ec89f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may estimate expected credit losses on an individual loan using a loss-rate approach when no loans with similar risk characteristics exist. ##### [326-20-55-24](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3909eb837e62cd3955cbca4fb86281ac8b8cdf99e4234ee11bdd651df41b164e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Community Bank B principally provides residential real estate loans to borrowers in the community. In the current year, Community Bank B expanded a program to originate commercial loans. Community Bank B has a few commercial loans outstanding at period end. In evaluating the loans, Community Bank B determines that one of the commercial loans does not share similar risk characteristics with other loans outstanding; therefore, Community Bank B believes that it is inappropriate to pool this commercial loan for purposes of determining its allowance for credit losses. This commercial loan has an amortized cost of $1 million. Historical loss information for commercial loans in the community with similar risk characteristics shows a 0.50 percent loss rate over the contractual term. ##### [326-20-55-25](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e0b5dfb20f6a9e1af29809e254aa7ab88d0754a4bd60140575bbeaf5ee4cce18 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Community Bank B considers relevant current conditions and reasonable and supportable forecasts that relate to its lending practices and environment and the specific borrower. Community Bank B determines that the significant factors affecting the performance of this loan are borrower-specific operating results and local unemployment rates. Community Bank B considers other qualitative factors including national macroeconomic conditions but determines that they are not significant inputs to the loss estimates for this loan. ##### [326-20-55-26](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:140bcc3d82ded6d4cafecf7e183d8007191892fcb6264854894ea6e042e23bfc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Community Bank B is able to reasonably forecast local unemployment rates and borrower-specific financial results for one year only. Community Bank B's reasonable and supportable forecasts of those factors indicate that local unemployment rates are expected to remain stable (based on the main employer in the community continuing to operate normally) and that there will be a deterioration in the borrower's financial results (based on an evaluation of rent rolls). Management determines that no adjustment is necessary for local unemployment rates because they are expected to be consistent with the conditions in the 0.50 percent loss-rate estimate. However, the current and forecasted conditions related to borrower-specific financial results are different from the conditions in the 0.50 percent loss-rate estimate, based on borrower-specific information. Community Bank B determines that an upward adjustment of 10 basis points that is incremental to the historical lifetime loss information is appropriate based on those factors. Management estimates the 10-basis-point adjustment based on its knowledge of commercial loan loss history in the community when borrowers exhibit similar declines in financial performance. Management is unable to support its estimate of expectations for local unemployment and borrower-specific financial results beyond the reasonable and supportable forecast period. Under this loss-rate method, Community Bank B applies the same immediate reversion technique as in Example 1, where Community Bank B has immediately reverted into historical losses reflective of the contractual term in accordance with paragraphs [326-20-30-8 through 30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) . ##### [326-20-55-27](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:06c68e9d4c5f502fbed1df3eef96521f4f38e33d1fda0a26d2f5a51915364ca7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The historical loss rate to apply to the amortized cost basis of the individual loan would be adjusted an incremental 10 basis points to 0.60 percent. The allowance for expected credit losses for the reporting period date would be $6,000. ##### [326-20-55-28](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:17b1b28a88045cd806be08fa3b63010a63e029599e8dee4578280a7e1654b835 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates one way an entity might estimate the expected credit losses on a vintage-year basis. ##### [326-20-55-29](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e03184ad8bebe5d2b52ac5a3d5f3f770129de77fda3b639c56bc461c5f707410 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank C is a lending institution that provides financing to consumers purchasing new or used farm equipment throughout the local area. Bank C originates approximately the same amount of loans each year. The four-year amortizing loans it originates are secured by collateral that provides a relatively consistent range of loan-to-collateral-value ratios at origination. If a borrower becomes 90 days past due, Bank C repossesses the underlying farm equipment collateral for sale at auction. ##### [326-20-55-30](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:0b957cd6b4fc992561f4047bcaf27988485fe4f0d42186f49ac9870546179943 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank C tracks those loans on the basis of the calendar year of origination. The following pattern of credit loss information has been developed (represented by the nonshaded cells in the accompanying table) based on the amount of amortized cost basis in each vintage that was written off as a result of credit losses. - ![](https://asc.understandingaccounting.org/asc-img/GUID-94DAEBAA-9A70-49A7-A5E7-A0DC1BFC6BB9-low.gif) Year of Origination Loss Experience in Years Following Origination Year 1 Year 2 Year 3 Year 4 Total Expected 20X1 $50 $120 $140 $30 $340 - 20X2 $40 $120 $140 $40 $340 - 20X3 $40 $110 $150 $30 $330 - 20X4 $60 $110 $150 $40 $360 - 20X5 $50 $130 $170 $50 $400 - 20X6 $70 $150 $180 $60 $460 $60 20X7 $80 $140 $190 $70 $480 $260 20X8 $70 $150 $200 $80 $500 $430 20X9 $70 $160 $200 $80 $510 $510 ##### [326-20-55-31](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:9a8a6a3ce07d137ce214a1d0aaebbf3060ded2a117f6e6ed7d2238d8dbdcf2ed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In estimating expected credit losses on the remaining outstanding loans at December 31, 20X9, Bank C considers its historical loss information. It notes that the majority of losses historically emerge in Year 2 and Year 3 of the loans. It notes that historical loss experience has worsened since 20X3 and that loss experience for loans originated in 20X6 has already equaled the loss experience for loans originated in 20X5 despite the fact that the 20X6 loans will be outstanding for one additional year as compared with those originated in 20X5. In considering current conditions and reasonable and supportable forecasts, Bank C notes that there is an oversupply of used farm equipment in the resale market that is expected to continue, thereby putting downward pressure on the resulting collateral value of equipment. It also notes that severe weather in recent years has increased the cost of crop insurance and that this trend is expected to continue. On the basis of those factors, Bank C determines adjustments to historical loss information for current conditions and reasonable and supportable forecasts. The remaining expected losses (represented by the shaded cells in the table in paragraph [326-20-55-30](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-30) in each respective year) reflect those adjustments, and Bank C arrives at expected losses of $60, $260, $430, and $510 for loans originated in 20X6, 20X7, 20X8, and 20X9, respectively. Therefore, the allowance for credit losses for the reporting period date would be $1,260. ##### [326-20-55-32](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:605cd2472858176abde9f604be13395a1c974e1901bd8049174fb5ad32bc3e4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates a situation in which loans with credit deterioration are evaluated individually because they no longer exhibit risk characteristics similar to other loans. There is no requirement to evaluate financial assets individually when a certain level of credit deterioration has occurred. However, the assessment of whether financial assets exhibit similar risk characteristics should be based on the relevant and appropriate facts and circumstances. ##### [326-20-55-33](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:0b80249d2701fd3c9636614906b4a5ffb52f746ddf2a26462beda460b2370e7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may estimate expected credit losses for some financial assets on a collective (pool) basis and may estimate expected credit losses for other assets on an individual basis when similar risk characteristics do not exist. As a result, the method used to estimate expected credit losses for a financial asset may change over time. For example, a pool of homogeneous loans may initially use a loss-rate method, but certain individual loans no longer may have similar risk characteristics because of credit deterioration. When a financial asset no longer shares similar risk characteristics with the original pool of financial assets, an entity should evaluate that financial asset to determine whether it shares risk characteristics similar to other pools of loans. Expected credit losses of that financial asset should be measured individually if there are no similar risk characteristics with other loans. A discounted cash flow approach is one method to estimate expected credit losses of individual loans, but it is not a required method. Paragraphs [326-20-55-34 through 55-36](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-34) illustrate those concepts. ##### [326-20-55-34](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:8452c5eaf047f502b7a2dca159a6f8c26ae6df1ba35f832e267fc3e6a9b96438 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. One loan program from Bank D provides unsecured commercial loans of up to $75,000 to small businesses and entrepreneurs. Given the relative homogeneity of the borrowers (in terms of credit risk) and loans (in terms of type, amount, and underwriting standards) in the program, Bank D manages this loan program on a collective basis. However, Bank D concludes that the loss estimates for loans with credit deterioration is based on borrower-specific facts and circumstances because the repayment of those loans depends on facts and circumstances unique to each borrower. Therefore, Bank D estimates expected credit losses on an individual basis for loans that no longer exhibit similar risk characteristics because of credit deterioration. A loss-rate method for estimating expected credit losses on a pooled basis is applied for the loans in the portfolio segment that continue to exhibit similar risk characteristics. ##### [326-20-55-35](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f3b7d5e86f06e6d8c104215e5626001a476380f9540e8966137f3b37fbeeda85 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To estimate expected credit losses for individual loans without similar risk characteristics, Bank D uses a discounted cash flow method for each loan. Frequently, Bank D has insight into the likelihood of a credit loss as a result of information provided by the borrower and recent discussions with the borrower given the elevated credit risk for these loans. Under a discounted cash flow method, the allowance for credit losses is estimated as the difference between the amortized cost basis and the present value of cash flows expected to be collected. ##### [326-20-55-36](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:89813427a37a7c1836b0a840c87e12f34ecb645283875005d82161796414021f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To estimate expected credit losses for the remainder of the loans that continue to exhibit similar risk characteristics, Bank D considers historical loss information (updated for current conditions and reasonable and supportable forecasts that affect the expected collectibility of the amortized cost basis of the pool) using a loss-rate approach. ##### [326-20-55-37](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:824847e87d9898853017b9e821964dbb688a864a76abaaac8ff81620352f2c75 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may estimate expected credit losses for trade receivables using an aging schedule. ##### [326-20-55-38](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:642ae237493a8b651f1d369023a69409c95e3cdb7754b437e3f77a830202f86d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity E manufactures and sells products to a broad range of customers, primarily retail stores. Customers typically are provided with payment terms of 90 days with a 2 percent discount if payments are received within 60 days. Entity E has tracked historical loss information for its trade receivables and compiled the following historical credit loss percentages: 1. a 0.3 percent for receivables that are current 2. b 8 percent for receivables that are 1-30 days past due 3. c 26 percent for receivables that are 31-60 days past due 4. d 58 percent for receivables that are 61-90 days past due 5. e 82 percent for receivables that are more than 90 days past due. ##### [326-20-55-39](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:a271501b26a9708374fae26d871c528b94c02d2e84a2e9d012cafbc1c48a9b6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity E believes that this historical loss information is a reasonable base on which to determine expected credit losses for trade receivables held at the reporting date because the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages (that is, the similar risk characteristics of its customers and its lending practices have not changed significantly over time). However, Entity E has determined that the current and reasonable and supportable forecasted economic conditions have improved as compared with the economic conditions included in the historical information. Specifically, Entity E has observed that unemployment has decreased as of the current reporting date, and Entity E expects there will be an additional decrease in unemployment over the next year. To adjust the historical loss rates to reflect the effects of those differences in current conditions and forecasted changes, Entity E estimates the loss rate to decrease by approximately 10 percent in each age bucket. Entity E developed this estimate based on its knowledge of past experience for which there were similar improvements in the economy. ##### [326-20-55-40](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:0e739af20c01bc3a434d4395c1494feaa2ea005018fc59eb55511731fbb02477 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the reporting date, Entity E develops the following aging schedule to estimate expected credit losses. - ![](https://asc.understandingaccounting.org/asc-img/GUID-20C78F84-857F-4799-9BC9-F47D50606FC3-low.gif) Past-Due Status Amortized Cost Basis Credit Loss Rate Expected Credit Loss Estimate Current " $5,984,698 " 0.27% " $16,159 " 1-30 days past due " 8,272 " 7.2% 596 31-60 days past due " 2,882 " 23.4% 674 61-90 days past due 842 52.2% 440 More than 90 days past due " 1,100 " 73.8% 812 " $5,997,794 " " $18,681 " ##### [326-20-55-40A](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40A) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e4d3d680bb8f4be3a7af7b7f63174a327bc16cb236dfd21903a357567d7c4b2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)This Example illustrates how to apply the practical expedient and accounting policy election for estimating credit losses on current accounts receivable and current contract assets arising from transactions accounted for under Topic 606 on revenue from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") in accordance with paragraphs [326-20-30-10A through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10A) . The accounting policy election to consider subsequent collection activity described in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) is applicable only to entities other than [public business entities](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."). Assume that Entity R is not a public business entity and does not have any contract assets. ##### [326-20-55-40B](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40B) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f795f830c0cc9eccf10b31864bd813f5f166fee27c98208c90a4dd2a281e1ae5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R manufactures and sells products to a broad range of customers that are primarily retail stores. Entity R provides customers with payment terms of 30 days. Entity R recognizes revenue and corresponding accounts receivable related to the sale of products in accordance with Topic 606 (referred to as "receivable(s)" in the remainder of this Example). Entity R monitors payment activity and, for purposes of estimating expected credit losses, classifies outstanding receivables on the basis of the number of days past due (delinquency) when a receivable has not been collected in accordance with the payment terms. Delinquent receivables are assessed to determine whether they continue to share similar risk characteristics with other receivables in the portfolio. Entity R uses its historical collection information to calculate a credit loss rate for each portfolio segment of receivables. ##### [326-20-55-40C](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40C) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:6beecaf4da66afb0b3550c99647e599b56ff628baaf1362c4a9229d4d4ce57f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)On December 31, 20X0, the outstanding balance and historical credit loss rates for each portfolio segment of Entity R’s receivables are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-2283E087-0446-4AF8-B37E-58F096B009C7-low.gif) Past-Due Status Outstanding Receivables Balance Credit Loss Rate Current " $5,984,698 " 0.3% 1-30 days past due " 8,272 " 8% 31-60 days past due " 2,882 " 26% 61-90 days past due 841 58% 91-120 days past due 554 82% More than 120 days past due 342 99% Total " $5,997,589 " ##### [326-20-55-40D](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40D) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:df1c3e09340d64eee6281032bef309372f433f904b1f607b4be491ddd1869881 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R has determined that its historical loss rates are a reasonable basis on which to estimate expected credit losses for outstanding receivables because of the similar risk characteristics of its customers (paragraph [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8)) and because its payment terms have not changed significantly over time. Management determined that current conditions as of the balance sheet date are consistent with conditions that existed during the period that historical data were collected. ##### [326-20-55-40E](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40E) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:b1a421611c7a74e0f4d72c10ae39a733eba6574585bc21c59cf9d488c5284f3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R elects the practical expedient in paragraphs [326-20-30-10C through 30-10D](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10C) to estimate expected credit losses related to its receivables classified as current in accordance with paragraph [210-10-45-3](https://asc.understandingaccounting.org/asc/210/10/#210-10-45-3). The practical expedient allows Entity R to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets. Entity R has determined that the current conditions as of the balance sheet date are consistent with those conditions that existed during the period that the historical data were collected. Accordingly, Entity R determines that no adjustment to its historical loss information is necessary. Entity R develops its estimate of expected credit losses as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-58DCDF27-901D-49FD-A659-BC9003688407-low.gif) Past-Due Status Outstanding Receivables Balance Credit Loss Rate Expected Credit Loss Estimate Current " $5,984,698 " 0.3% " $17,954 " 1-30 days past due " 8,272 " 8% 662 31-60 days past due " 2,882 " 26% 749 61-90 days past due 841 58% 488 91-120 days past due 554 82% 454 More than 120 days past due 342 99% 339 Total " $5,997,589 " " $20,646 " ##### [326-20-55-40F](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40F) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:9c9d675127db3ea95ac171a220693ba6cc531d8a0a832d51affc589047375d24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R discloses that it has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets in accordance with the requirement in paragraph [326-20-50-12A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A). ##### [326-20-55-40G](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40G) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:6907d7a2f925f5f88b6df71243974260e9f644bb03259c00073965c72befb6e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Assume the same facts and circumstances as Case 1, except that Entity R has an outstanding receivable balance of $2,000 aged 30-days past due at the balance sheet date from Customer S, who filed for bankruptcy on December 15, 20X0. The entirety of the balance is not expected to be collected. As a result, Entity R determines that the receivable due from Customer S no longer shares similar risk characteristics with receivables due from other customers. Therefore, Entity R measures expected credit losses from Customer S individually. ##### [326-20-55-40H](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40H) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f2d5043cc0259f53c4fb82d2be6963e3e05e6a85c62413f14798ef2b194fd5ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R has not identified other information that is expected to affect the collectibility of the remaining portfolio of receivables and estimates expected credit losses on the remaining portfolio collectively using the practical expedient. Entity R develops its estimate of expected credit losses as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-6C17479C-4074-4C16-A938-B8245B287D54-low.gif) Past-Due Status Outstanding Receivables Balance Credit Loss Rate Expected Credit Loss Estimate Current " $5,984,698 " 0.3% " $17,954 " 1-30 days past due " 6,272 " (a) 8% 502 31-60 days past due " 2,882 " 26% 749 61-90 days past due 841 58% 488 91-120 days past due 554 82% 454 More than 120 days past due 342 99% 339 Collectively assessed subtotal " 5,995,589 " " 20,486 " Individually assessed subtotal (Customer S) " 2,000 " " 2,000 " Total " $5,997,589 " " $22,486 " "(a) Outstanding receivable balance reduced by $2,000 to reflect individual assessment of Customer S." ##### [326-20-55-40I](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40I) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:127c63bcbcc731318f35e7f93c99f2b5f1f74d1411548120c11f551911bcdd43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R discloses that it has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets in accordance with the requirement in paragraph [326-20-50-12A](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A). ##### [326-20-55-40J](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40J) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:4d8c403defce8953bd12925651a53e00b4dec072761f7dd927ca04e29d8f82ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Assume the same facts and circumstances as Case 1, except that Entity R also elects to consider collection activity after the balance sheet date when estimating expected credit losses (that is, it elects to apply the accounting policy election in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) ). Entity R considers collection activity through March 1, 20X1, which is the date that the [financial statements are available to be issued.](https://asc.understandingaccounting.org/glossary/f/#financial-statements-are-available-to-be-issued "Financial statements are considered available to be issued when they are complete in a form and format that complies with GAAP and all approvals necessary for issuance have been obtained, for example, from management, the board of directors, and/or significant shareholders. The process involved in creating and distributing the financial statements will vary depending on an entity's management and corporate governance structure as well as statutory and regulatory requirements.") ##### [326-20-55-40K](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40K) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:a02bb10ed583a894c2ac94da5ea031c3b07aee4c40c31160e6e0e3564aa5834f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R has not identified other information that is expected to affect the collectibility of its receivables other than the collection activity detailed in paragraph [326-20-55-40L](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40L). Entity R has not updated its historical credit loss rates for collection activity after the balance sheet date. ##### [326-20-55-40L](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40L) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:eb92cd54ce51dfde97b4d86b44e96be1786854c39a77cb3e8e02c02a03a99e7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R’s December 31, 20X0 financial statements are available to be issued on March 1, 20X1. Entity R has observed the following subsequent collection activity for all outstanding receivables as of the balance sheet date (December 31, 20X0). - ![](https://asc.understandingaccounting.org/asc-img/GUID-D9819509-6C31-48F4-A7DD-266BA33D717E-low.gif) Balance Sheet Date Date The Entity Has Selected To Consider Subsequent Collection Activity 12/31/20X0 3/1/20X1 Past-Due Status Outstanding Receivables Balance Collections between Balance Sheet Date and 3/1/20X1 Remaining Balance Uncollected Past-Due Status Credit Loss Rate " (a)" Expected Credit Loss Estimate Current " $5,984,698 " " $(5,925,118)" " $59,580 " 31-60 days past due 26% " $15,491 " 1-30 days past due " 8,272 " " (3,676)" " 4,596 " 61-90 days past due 58% " 2,666 " 31-60 days past due " 2,882 " (441) " 2,441 " 91-120 days past due 82% " 2,002 " 61-90 days past due 841 (300) 541 More than 120 days past due 99% 536 91-120 days past due 554 (149) 405 More than 120 days past due 99% 401 More than 120 days past due 342 (43) 299 More than 120 days past due 99% 296 Total " $5,997,589 " " $(5,929,727)" " $67,862 " " $21,392 " (a) Credit loss rate based on the collection status as of the date the entity has selected to consider subsequent collection activity. Entity R develops its estimate of expected credit losses by determining which receivables have been collected between the balance sheet date and the date that the entity has selected to consider subsequent collection activity (in this Case, March 1, 20X1) and by recognizing an allowance for the amounts that are uncollected based on its historical loss rates as of the balance sheet date that correspond to the uncollected balance’s delinquency status as of the date the entity has selected to consider subsequent collection activity (in this Case, March 1, 20X1). ##### [326-20-55-40M](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40M) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:948f9d8a3d98eb8e28ccb5cbe418772c294af393098cbdb541d087ecae0b6d95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R discloses that it has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets and the accounting policy election to consider subsequent collection activity, along with the date through which collection activity was considered (in this Case, March 1, 20X1), in accordance with the requirements in paragraphs [326-20-50-12A through 50-12B](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A) . ##### [326-20-55-40N](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40N) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:17424cc8776137b7927e052b8945266cab6dde456228aad15a584a869284e31d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Assume the same facts and circumstances as Case 1, except that Entity R also elects to consider collection activity after the balance sheet date when estimating expected credit losses (that is, it elects to apply the accounting policy election in paragraphs [326-20-30-10E through 30-10H](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10E) ). Entity R considers subsequent collection activity through May 31, 20X1. ##### [326-20-55-40O](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40O) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d1e6cbfaf4f1ea3f7a27b8f8230eac2fa0079d669d894a5a6e9903b199254f93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R has not identified other information that is expected to affect the collectibility of its receivables other than the collection activity detailed in paragraph [326-20-55-40P](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40P). Entity R has not updated its historical credit loss rates for collection activity after the balance sheet date. ##### [326-20-55-40P](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40P) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:fe36f896ef1123264c6825f68bede40f46694c5e6bd6c86b6f4428ff4f7ed630 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R’s December 31, 20X0 financial statements are available to be issued on June 15, 20X1. As of May 31, 20X1, Entity R has observed the following collection activity for outstanding receivables as of the balance sheet date (December 31, 20X0). - ![](https://asc.understandingaccounting.org/asc-img/GUID-3B06479D-658C-4574-A0CE-D584ABA8B400-low.gif) Balance Sheet Date Date The Entity Has Selected To Consider Subsequent Collection Activity 12/31/20X0 5/31/20X1 Past-Due Status Outstanding Receivables Balance Collections between Balance Sheet Date and 5/31/20X1 Remaining Balance Uncollected Past-Due Status Credit Loss Rate " (a) " Expected Credit Loss Estimate Current " $5,984,698 " " $(5,968,449)" " $16,249 " More than 120 days past due 99% " $16,087 " 1-30 days past due " 8,272 " " (8,272)" - More than 120 days past due 99% - 31-60 days past due " 2,882 " " (2,279)" 603 More than 120 days past due 99% 597 61-90 days past due 841 (623) 218 More than 120 days past due 99% 216 91-120 days past due 554 (289) 265 More than 120 days past due 99% 262 More than 120 days past due 342 (145) 197 More than 120 days past due 99% 195 Total " $5,997,589 " " $(5,980,057)" " $17,532 " " $17,357 " (a) Credit loss rate based on the collection status as of the date the entity has selected to consider subsequent collection activity. As part of the estimate of expected credit losses, Entity R applies a credit loss rate of 99 percent to the receivables that are uncollected as of the date through which it considers subsequent collection activity (in this Case, May 31, 20X1) because all remaining amounts have been outstanding for more than 120 days. ##### [326-20-55-40Q](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-40Q) Pending content: yes Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d457d17c93b9ed70da5db2d45c666e0864e526d511fe53c602474d1651dc4c70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [326-10-65-6](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-6)Entity R discloses that it has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets and the accounting policy election to consider subsequent collection activity, along with the date through which collection activity was considered (in this Case, May 31, 20X1), in accordance with the requirements in paragraphs [326-20-50-12A through 50-12B](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-12A) . ##### [326-20-55-41](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-41) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:45085342817e41ab310cfd86f0e8ef36cc6b0702ce75e3a220206cf9c79a9537 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may implement the guidance in paragraph [326-20-35-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-5) for estimating expected credit losses on a collateral-dependent financial asset for which the borrower is experiencing financial difficulty based on the entity's assessment. ##### [326-20-55-42](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-42) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e312bcee2aca3694857affcdeaaa4cb5dc260c57c82b5036c8eb24e28b1f3d5d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank F provides commercial real estate loans to developers of luxury apartment buildings. Each loan is secured by a respective luxury apartment building. Over the past two years, comparable standalone luxury housing prices have dropped significantly, while luxury apartment communities have experienced an increase in vacancy rates. ##### [326-20-55-43](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-43) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:796b28d05de2ee77ed2d81966bbc77b03bc2dfce866557f2a4768b0dc7aecb2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of 20X7, Bank F reviews its commercial real estate loan to Developer G and observes that Developer G is experiencing financial difficulty as a result of, among other things, decreasing rental rates and increasing vacancy rates in its apartment building. ##### [326-20-55-44](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-44) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:2b7d36e40e5ba70b97ad1781d8a0549a7ec1010072b3b153a4ac87074f528ac3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After analyzing Developer G's financial condition and the operating statements for the apartment building, Bank F believes that it is unlikely Developer G will be able to repay the loan at maturity in 20X9. Therefore, Bank F believes that repayment of the loan is expected to be substantially through the foreclosure and sale (rather than the operation) of the collateral. As a result, in its financial statements for the period ended December 31, 20X7, Bank F utilizes the practical expedient provided in paragraph [326-20-35-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-5) and uses the apartment building's fair value, less costs to sell, when developing its estimate of expected credit losses. ##### [326-20-55-45](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-45) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e173de28882ddc3b06dadc4113c7aeeda2128d24d110503cb3e91fdab68dd0ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way an entity may implement the guidance in paragraph [326-20-35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-6) for estimating expected credit losses on financial assets with collateral maintenance provisions. ##### [326-20-55-46](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-46) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:aad3bdd76a5f800958c86be1c0be33002fa5c64faabe0866fc70a3587d4f35c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank H enters into a reverse repurchase agreement with Entity I that is in need of short-term financing. Under the terms of the agreement, Entity I sells securities to Bank H with the expectation that it will repurchase those securities for a certain price on an agreed-upon date. In addition, the agreement contains a provision that requires Entity I to provide security collateral that is valued daily, and the amount of the collateral is adjusted up or down to reflect changes in the fair value of the underlying securities transferred. This collateral maintenance provision is designed to ensure that at any point during the arrangement, the fair value of the collateral continually equals or is greater than the amortized cost basis of the reverse repurchase agreement. ##### [326-20-55-47](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-47) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:4b3f79a1e9f0de5f119f45b4aa98c0a6f3799e34deaf68141f42c9425ec86bba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of the first reporting period after entering into the agreement with Entity I, Bank H evaluates the reverse repurchase agreement's collateral maintenance provision to determine whether it can use the practical expedient in accordance with paragraph [326-20-35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-6) for estimating expected credit losses. Bank H determines that although there is a risk that Entity I may default, Bank H's expectation of nonpayment of the amortized cost basis on the reverse repurchase agreement is zero because Entity I continually adjusts the amount of collateral such that the fair value of the collateral is always equal to or greater than the amortized cost basis of the reverse repurchase agreement. In addition, Bank H continually monitors that Entity I adheres to the collateral maintenance provision. As a result, Bank H uses the practical expedient in paragraph [326-20-35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-6) and does not record expected credit losses at the end of the first reporting period because the fair value of the security collateral is greater than the amortized cost basis of the reverse repurchase agreement. Bank H performs a reassessment of the fair value of collateral in relation to the amortized cost basis each reporting period. ##### [326-20-55-48](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-48) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e9ad8ee44bebbf0dcadea3e089e32303aa6341c45bc76bade7db856fe538c26b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one way, but not the only way, an entity may estimate expected credit losses when the expectation of nonpayment is zero. This example is not intended to be only applicable to U.S. Treasury securities. ##### [326-20-55-49](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-49) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f2ab3a69a0b1810cffaf59e4aad42b41c210127e5abb6fd4b0ef065cd0a08fe6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity J invests in U.S. Treasury securities with the intent to hold them to collect contractual cash flows to maturity. As a result, Entity J classifies its U.S. Treasury securities as held to maturity and measures the securities on an amortized cost basis. ##### [326-20-55-50](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-50) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3e50d2040301d829f01e10ef46c062b3261167fceb9f27479bf5908ee35e0954 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although U.S. Treasury securities often receive the highest credit rating by rating agencies at the end of the reporting period, Entity J's management still believes that there is a possibility of default, even if that risk is remote. However, Entity J considers the guidance in paragraph [326-20-30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10) and concludes that the long history with no credit losses for U.S. Treasury securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero, even if the U.S. government were to technically default. Judgment is required to determine the nature, depth, and extent of the analysis required to evaluate the effect of current conditions and reasonable and supportable forecasts on the historical credit loss information, including qualitative factors. In this circumstance, Entity J notes that U.S. Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity's currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly is viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, Entity J does not record expected credit losses for its U.S. Treasury securities at the end of the reporting period. The qualitative factors considered by Entity J in this Example are not an all-inclusive list of conditions that must be met in order to apply the guidance in paragraph [326-20-30-10](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-10). ##### [326-20-55-51](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-51) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:154ec58d66c2da2b78f15907e02389e4ec7790703d72b7f26bd720f3102e255e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates how an entity may implement the guidance in paragraphs [326-20-35-8 through 35-8A](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8) relating to writeoffs and recoveries of expected credit losses on financial assets. ##### [326-20-55-52](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-52) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d94244f7c3ae2182204c1d78f2a20e6c89a152c73efed8d91c16a58423efca3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank K currently evaluates its loan to Entity L on an individual basis because Entity L is 90 days past due on its loan payments and the loan no longer exhibits similar risk characteristics with other loans in the portfolio. At the end of December 31, 20X3, the amortized cost basis for Entity L's loan is $500,000 with an allowance for credit losses of $375,000. During the first quarter of 20X4, Entity L issues a press release stating that it is filing for bankruptcy. Bank K determines that the $500,000 loan made to Entity L is uncollectible. Bank K considers all available information that is relevant and reasonably available, without undue cost or effort, and determines that the information does not support an expectation of a future recovery in accordance with paragraph [326-20-30-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-7). Bank K measures a full credit loss on the loan to Entity L and writes off its entire loan balance in accordance with paragraph [326-20-35-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8), as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-BACD167C-3BB9-4624-8C69-0BF0AF907947-low.gif) Credit loss expense "$125,000 " Allowance for credit losses "$125,000 " Allowance for credit losses "$500,000 " Loan receivable "$500,000 " During March 20X6, Bank K receives a partial payment of $50,000 from Entity L for the loan previously written off. Upon receipt of the payment, Bank K recognizes the recovery in accordance with paragraph [326-20-35-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8), as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-5C0DDE05-B96A-4A15-AB6A-3B9A760DD8B6-low.gif) Cash "$50,000 " Allowance for credit losses (recovery) "$50,000 ##### [326-20-55-53](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-53) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:1e3adf56e37a94588700a7ef8ee468bf1f91041f7ce2395995d71a47ac52b93a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For its March 31, 20X6 financial statements, Bank K estimates expected credit losses on its financial assets and determines that the current estimate is consistent with the estimate at the end of the previous reporting period. During the period, Bank K does not record any change to its allowance for credit losses account other than the recovery of the loan to Entity L. To adjust its allowance for credit losses to reflect the current estimate, Bank K reports the following on March 31, 20X6: - ![](https://asc.understandingaccounting.org/asc-img/GUID-015AD83F-68AE-4907-8404-7E11F703CFD1-low.gif) Allowance for credit losses "$50,000 " Credit loss expense "$50,000 " Alternatively, Bank K could record the recovery of $50,000 directly as a reduction to credit loss expense, rather than initially recording the cash received against the allowance. ##### [326-20-55-54](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-54) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:09526ce79365a09950026fa268755a3a2c11c0019f7f5fb5035de959875454b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the guidance in paragraph [326-20-30-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-11) for off-balance-sheet credit exposures that are unconditionally cancellable by the issuer. ##### [326-20-55-55](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-55) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:75fe6b3ef0cbfceb0e4bf9aaefdc7f0efd0897a1c53b28dde4a726bc6453d828 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank M has a significant credit card portfolio, including funded balances on existing cards and unfunded commitments (available credit) on credit cards. Bank M's card holder agreements stipulate that the available credit may be unconditionally cancelled at any time. ##### [326-20-55-56](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-56) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:77c22c800fb4ae5cc63f8f60ff163b499d9019c22beaced748f92fbad3b7a743 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When determining the allowance for credit losses, Bank M estimates the expected credit losses over the remaining lives of the funded credit card loans. Bank M does not record an allowance for unfunded commitments on the unfunded credit cards because it has the ability to unconditionally cancel the available lines of credit. Even though Bank M has had a past practice of extending credit on credit cards before it has detected a borrower's default event, it does not have a present contractual obligation to extend credit. Therefore, an allowance for unfunded commitments should not be established because credit risk on commitments that are unconditionally cancellable by the issuer are not considered to be a liability. ##### [326-20-55-57](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-57) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:750fd16dfb340b6475d3504c7c8b423221445a27028c24810c9ca8d7a74b357f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates factors that may be considered when assessing whether the purchased financial assets have more than an insignificant deterioration in credit quality since origination. ##### [326-20-55-58](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-58) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:509b054282da2bf71bd4fb387b3cde4aef324fab24996fabc3c74ab7ce423b51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity N purchases a portfolio of financial assets subsequently measured at amortized cost basis with varying levels of credit quality. When determining which assets should be considered to be in the scope of the guidance for purchased financial assets with credit deterioration, Entity N considers the factors in paragraph [326-20-55-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-4) that are relevant for determining collectibility. ##### [326-20-55-59](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-59) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f57024a7bbf63ad45541ac54e78265a1c041fbcb399078cdd873d9462645d2a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity N assesses what is more-than-insignificant credit deterioration since origination and considers the purchased assets with the following characteristics to be consistent with the factors that affect collectibility in paragraph [326-20-55-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-4). Entity N records the allowance for credit losses in accordance with paragraph [326-20-30-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) for the following assets: 1. a Financial assets that are delinquent as of the acquisition date 2. b Financial assets that have been downgraded since origination 3. c Financial assets that have been placed on nonaccrual status 4. d Financial assets for which, after origination, credit spreads have widened beyond the threshold specified in its policy. ##### [326-20-55-60](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-60) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3f5cbeaab0c9dfa527e0c863122e930e2052f85343e0ec1d0f4aba377dd87baf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Judgment is required when determining whether purchased financial assets should be recorded as purchased financial assets with credit deterioration. Entity N's considerations represent only a few of the possible considerations. There may be other acceptable considerations and policies applied by an entity to identify purchased financial assets with credit deterioration. ##### [326-20-55-61](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-61) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e7a759badc85016766d0a1e3283008ce7d440ac65b286525ebfa4bc6b1a55072 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates application of the guidance to an individual purchased financial asset with credit deterioration. ##### [326-20-55-62](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-62) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:6a5bc9cac2d923a0611c188362ba333bc14d948e59ce25e47b4a78b87ef349d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under paragraphs [326-20-30-13](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) and [310-10-35-53B](https://asc.understandingaccounting.org/asc/310/10/#310-10-35-53B), for purchased financial assets with credit deterioration, the discount embedded in the purchase price that is attributable to expected credit losses should not be recognized as interest income and also should not be reported as a credit loss expense upon acquisition. ##### [326-20-55-63](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-63) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:a8b0e4c452ddf93837cc9704c84919a2ff662f05cc5dfc6a6dffe8fdd2535fbb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank O records purchased financial assets with credit deterioration in its existing systems by recognizing the amortized cost basis of the asset, at acquisition, as equal to the sum of the purchase price and the associated allowance for credit loss at the date of acquisition. The difference between amortized cost basis and the par amount of the debt is recognized as a noncredit discount or premium. By doing so, the credit-related discount is not accreted to interest income after the acquisition date. ##### [326-20-55-64](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-64) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:def8ad18986ff4ab6a46d7cd94783c76478cbd5b433d2cda6472fec784eb8333 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume that Bank O pays $750,000 for a financial asset with a par amount of $1 million. The instrument is measured at amortized cost basis. At the time of purchase, the allowance for credit losses on the unpaid principal balance is estimated to be $175,000. At the purchase date, the statement of financial position would reflect an amortized cost basis for the financial asset of $925,000 (that is, the amount paid plus the allowance for credit loss) and an associated allowance for credit losses of $175,000. The difference between par of $1 million and the amortized cost of $925,000 is a non-credit-related discount. The acquisition-date journal entry is as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-A0DDC9C8-89A3-4E85-A63E-022DED808757-low.gif) Loan—par amount "$1,000,000 " Loan—noncredit discount " $75,000 " Allowance for credit losses " 175,000 " Cash " 750,000 " ##### [326-20-55-65](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-65) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:01d5ab4a359a26f002603fb6cf66153c6f557bd74d46d60dc550107cb2834931 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subsequently, the $75,000 noncredit discount would be accreted into interest income over the life of the financial asset consistent with other Topics. The $175,000 allowance for credit losses should be updated in subsequent periods consistent with the guidance in Section 326-20-35, with changes in the allowance for credit losses on the unpaid principal balance reported immediately in the statement of financial performance as a credit loss expense. ##### [326-20-55-66](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-66) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:0090c96e6a04cd989bc651198516760b373f6ad51bc45e64edadac9b8ac251cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the guidance to determine the expected credit loss using a loss rate for an individual purchased financial asset with credit deterioration. The method applied to initially measure expected credit losses for purchased financial assets with credit deterioration generally would be applied consistently over time and should faithfully estimate expected credit losses for financial assets by applying this Subtopic. This does not mean that the application of a loss-rate approach is an irrevocable election. ##### [326-20-55-67](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-67) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e63ed60b6da5d2d518c94645c1fe726aea52fc6001c2c9441ae64144468c8656 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank P purchases a $5 million amortizing nonprepayable loan with a 6 percent coupon rate and original contract term of 5 years. All contractual principal and interest payments due of $1,186,982 for each of the first 3 years of the loan's life have been received, and the loan has an unpaid balance of $2,176,204 at the purchase date at the beginning of Year 4 of the loan's life. The original contractual amortization schedule of the loan is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F3D6D8F0-B3F2-4CDD-A069-33B732CFB24C-low.gif) " 5,000,000 " 6% 5 "$1,186,982 " Original Amortization Table Period Beginning Balance Total Payment Interest Principal Ending Balance 1 " $5,000,000 " " $1,186,982 " " $300,000 " " $886,982 " " $4,113,018 " 2 " 4,113,018 " " 1,186,982 " " 246,781 " " 940,201 " " 3,172,817 " 3 " 3,172,817 " " 1,186,982 " " 190,369 " " 996,613 " " 2,176,204 " 4 " 2,176,204 " " 1,186,982 " " 130,572 " " 1,056,410 " " 1,119,794 " 5 " 1,119,794 " " 1,186,982 " " 67,188 " " 1,119,794 " - Totals " $5,934,910 " " $934,910 " " $5,000,000 " ##### [326-20-55-68](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-68) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:31647f1d58cf1e9ff499d15bf6bae9fbf0575b43f3d14b7dc8ba848c8d44343f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the purchase date, the loan is purchased for $1,918,559 because significant credit events have been discovered. The purchaser expects a 10 percent loss rate, based on historical loss information over the contractual term of the loan, adjusted for current conditions and reasonable and supportable forecasts, for groups of similar loans. In accordance with paragraph [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14), as a result of the expected credit losses, the allowance is estimated as $217,620 by multiplying the 10 percent loss rate by the unpaid principal balance, or par amount, of the loan (see beginning balance in Year 4 in the table above). The following journal entry is recorded at the acquisition of the loan: - ![](https://asc.understandingaccounting.org/asc-img/GUID-B3DDB300-59EB-4443-A8EA-5E0D7F1FB747-low.gif) Loan " $2,176,204 " Loan—noncredit discount " $40,025 " Allowance for credit losses " 217,620 " Cash " 1,918,559 " ##### [326-20-55-69](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-69) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:0158b3c00b2dd153d9298f5625c2b7eaf39655cc6826a7652cf0c0f93236f8e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contractual interest rate is adjusted for the noncredit discount of $40,025 to determine the discount rate (consistent with paragraph [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14)) of 7.33 percent, which excludes the purchaser's assessment of expected credit losses at the acquisition date. The 7.33 percent (rounded from 7.3344 percent) is computed as the rate that equates the amortized cost of $2,136,179 (computed by adding the purchase price of $1,918,559 to the gross-up adjustment of $217,620) with the net present value of the remaining contractual cash flows on the purchased asset ($1,186,982 in each of Years 4 and 5). ##### [326-20-55-70](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-70) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:2625a5496c0a09eaa3a3d0293da3dcc0824c9789710a4ade8717caed9cd2b8fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A default occurs in the last year of the loan's life. The amortization of the purchased loan would be recorded as follows for the periods after the purchase date in Years 4 and 5 of the loan's life. - ![](https://asc.understandingaccounting.org/asc-img/GUID-311DFB9B-91A7-4F74-BD80-85CF85926FA5-low.gif) Book Amortization Period Beginning Balance (a) Total Payment (b) Writeoff (c) Accrued Interest (d) Reduction (e) Ending Balance (f) 4 " $2,136,179 " "$1,186,982 " "$156,676 " "$1,030,306 " "$1,105,873 " 5 " 1,105,873 " " 969,362 " " $217,620 " " 81,109 " " 1,105,873 " - Totals " $2,156,344 " " $217,620 " " $237,785 " " $2,136,179 " (a) "The amortized cost at the purchase date is determined as the sum of the purchase price of $1,918,559 and the allowance for credit losses of $217,620." (b) The cash received is consistent with the expectations at the purchase date. (c) The writeoff represents the default in the final year of the loan that is written off. (d) The interest income recognized is determined by multiplying the beginning amortized cost by the discount rate of 7.33 percent (as determined in accordance with paragraph 326-20-55-69). (e) "The reduction of amortized cost is determined as the sum of the cash received (b) and writeoffs recognized (c) (if any), less the interest income recognized (d). The writeoff in Year 5 represents the difference between the contractual cash flows of $1,186,982 and the actual cash flows of $969,362." (f) "The ending amortized cost is equal to the beginning amortized cost (a), less the amortized cost reduction (e). ##### [326-20-55-71](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-71) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:b6d361c3c7c86c3e5bda34df32f8b1cf5868aeaa3721ceda1965839755c9f9f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The rollforward of the allowance would be as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-DE5726E9-7602-4B3D-A89B-1A328D558835-low.gif) Beginning allowance for credit losses " $217,620 " " Plus, credit loss expense " - " Less, writeoffs " " (217,620)" Ending allowance for credit losses $- ##### [326-20-55-72](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-72) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:716488e23901d1d5ddeb73c94d57c74721e81b7846e7252163add6b921fb0a9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the guidance to determine the expected credit loss using a discounted cash flow approach for an individual purchased financial asset with credit deterioration. The method applied to initially measure expected credit losses for purchased financial assets with credit deterioration generally would be applied consistently over time and should faithfully estimate expected credit losses for financial assets by applying this Subtopic. This does not mean that the application of a discounted cash flow approach is an irrevocable election. ##### [326-20-55-73](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-73) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:5443beb90b0429fba712076beaa0743071a32d9be7b022bf5233b5f4cf573ff2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example uses the same assumptions as in Example 13, as described in paragraphs [326-20-55-66 through 55-71](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-66) . ##### [326-20-55-74](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-74) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:755ccb4ecdf7ab473e530f938306d68d5051c315e9e5ebd9637e8b5f034f1d49 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine the discount rate in accordance with paragraph [326-20-30-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-14), the expected cash flows would be estimated and discounted at a rate that equates the purchase price with the present value of expected cash flows. The expected cash flows, including the considerations for current conditions and reasonable and supportable forecasts, are expected to be $1,186,982 in Year 4 and $969,362 in Year 5. The discount rate that equates the purchase price with the cash flows expected to be collected is 8.46 percent (rounded from 8.455 percent). This also is the same rate that equates the amortized cost basis (purchase price plus the acquisition date allowance for credit losses) with the net present value of the future contractual cash flows. ##### [326-20-55-75](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-75) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:5122f68c5691a0d78acb30fcdc7e848ba2b12c4389a28b04739f1af45ebea505 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To determine the allowance for credit losses at the purchase date, the expected credit loss (that is, the contractual cash that an entity does not expect to collect) is discounted using the discount rate of 8.46 percent. The expected credit loss is $217,620 in Year 5, as determined by finding the difference between the contractual cash flows of $1,186,982 and the expected cash flows of $969,362. The present value of the expected loss at the purchase date is $185,012. The journal entry to record the purchase of this loan is as follows: - ![](https://asc.understandingaccounting.org/asc-img/GUID-35E87568-015F-4ED6-9D2C-3E0B0215A7AB-low.gif) Loan " $2,176,204 " Loan—noncredit discount " $72,633 " Allowance for credit losses " 185,012 " Cash " 1,918,559 " ##### [326-20-55-76](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-76) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:cab1198a7a4b48e9a331001772670f68917505608a9575da48c506862a003c26 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amortization of the loan in the years following the purchase date is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-5DD33FB1-F210-4651-90EC-BA1E0C2C46C6-low.gif) Book Amortization Period Beginning Balance (a) Total Payment (b) Writeoff (c) Accrued Interest (d) Reduction (e) Ending Balance (f) 4 " $2,103,571 " " $1,186,982 " " $177,857 " " $1,009,125 " " $1,094,446 " 5 " 1,094,446 " " 969,362 " " $217,620 " " 92,536 " " 1,094,446 " - Totals " $2,156,344 " " $217,620 " " $270,393 " " $2,103,571 " (a) "The amortized cost at the purchase date is determined as the sum of the purchase price of $1,918,559 and the allowance for credit losses of $185,012." (b) The cash received is consistent with the expectations at the purchase date. (c) The writeoff represents the default in the final year of the loan that is written off. (d) "The interest income recognized is determined by multiplying the beginning amortized cost by the discount rate of 8.46 percent (as determined in accordance with paragraph 326-20-55-74)." (e) "The reduction of amortized cost is determined as the sum of the cash received (b) and writeoffs recognized (c) (if any), less the interest income recognized (d). The writeoff in Year 5 represents the difference between the contractual cash flows of $1,186,982 and the actual cash flows of $969,362." (f) "The ending amortized cost is equal to the beginning amortized cost (a), less the amortized cost reduction (e)." ##### [326-20-55-77](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-77) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:8e17f55e10885b73fa9ae9a2651a4d5a3e4464c825b1aff1eca907a6d817fd13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Day 1 allowance established at the purchase date was $185,012. The allowance for credit losses was estimated on a discounted cash flow approach and, therefore, the allowance for credit losses needs to be adjusted for the time value of money. The rollforward of the allowance for credit losses is shown below. - ![](https://asc.understandingaccounting.org/asc-img/GUID-7764763B-79D5-435A-994E-23DCE15D3CFD-low.gif) Beginning allowance for credit losses " $185,012 " "Plus, credit loss expense" " 15,643 " (a) "Less, writeoffs" - Ending allowance for credit losses (Year 4) " 200,655 " "Plus, credit loss expense" " 16,965 " (a) "Less, writeoffs" " (217,620)" (b) Ending allowance for credit losses (Year 5) $- (a) The provision for credit losses in Years 4 and 5 is determined by multiplying the beginning allowance for credit losses by the discount rate of 8.46 percent to adjust for the time value of money. (b) "The writeoff represents the default in Year 5. The default is the difference between the Year 5 contractual cash flows of $1,186,982 and the actual cash flows received of $969,362. ##### [326-20-55-78](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-78) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:9ec69a49c5a030ed099cb3745d88739192f4632ab65ec9d77369d73e1d95c52f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The net income effect of a loss-rate approach illustrated in Example 13 and of a discounted cash flow approach illustrated in this Example is the same ($237,785 net income). The difference between the two approaches is that the Day 1 allowance for credit losses under a discounted cash flow approach explicitly reflects the time value of money. Therefore, it needs to be accreted to the future value of the loss that ultimately will occur. The change in the allowance for credit losses associated with the time value of money can be presented either as credit loss expense or as an adjustment to interest income in accordance with paragraph [326-20-45-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-45-3). Therefore, the discounted cash flow approach, over the life of the asset, presents interest income as $270,393 but will require $32,608 ($15,643 in Year 4 plus $16,965 in Year 5) of credit loss expense to be recorded for the time value of money, resulting in net interest income after credit loss expense of $237,785. Under a loss-rate approach as illustrated in Example 13, interest income over the life of the asset is $237,785 but does not require credit loss expense to be recognized. ##### [326-20-55-79](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-79) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:f7ee96774e7e7d90dda408e6b2ff88a153b355535436a06d5b92dd6e567b68a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates the presentation of credit quality disclosures for a financial institution with a narrow range of loan products offered to local customers—both consumer and commercial. Depending on the size and complexity of an entity's portfolio of financing receivables, the entity may present disclosures that are more or less detailed than the following Example. An entity may choose other methods of determining the class of financing receivable and may determine different credit quality indicators that reflect how credit risk is monitored. Some entities may have more than one credit quality indicator for certain classes of financing receivables. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9359A136-ADE1-4CC3-AE62-8E7CBE89F37B-low.gif) Term Loans Amortized Cost Basis by Origination Year "As of December 31, 20X5" 20X5 20X4 20X3 20X2 20X1 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Total Residential mortgage: Risk rating: 1–2 internal grade $- $- $- $- $- $- $- $- $- 3–4 internal grade - - - - - - - - - 5 internal grade - - - - - - - - - 6 internal grade - - - - - - - - - - 7 internal grade - - - - - - - - - Total residential mortgage loans $- $- $- $- $- $- $- $- $- Residential mortgage loans: Current-period gross writeoffs $- $- $- $- $- $- $- $- $- Consumer: Risk rating: 1–2 internal grade $- $- $- $- $- $- $- $- $- 3–4 internal grade - - - - - - - - - 5 internal grade - - - - - - - - - 6 internal grade - - - - - - - - - 7 internal grade - - - - - - - - - Total consumer $- $- $- $- $- $- $- $- $- Consumer loans: Current-period gross writeoffs $- $- $- $- $- $- $- $- $- Commercial business: Risk rating: 1–2 internal grade $- $- $- $- $- $- $- $- $- 3–4 internal grade - - - - - - - - - 5 internal grade - - - - - - - - - 6 internal grade - - - - - - - - - 7 internal grade - - - - - - - - - Total commercial business $- $- $- $- $- $- $- $- $- Commercial business loans: Current-period gross writeoffs $- $- $- $- $- $- $- $- $- Commercial mortgage: Risk rating: 1–2 internal grade $- $- $- $- $- $- $- $- $- 3–4 internal grade - - - - - - - - - 5 internal grade - - - - - - - - - 6 internal grade - - - - - - - - - 7 internal grade - - - - - - - - - Total commercial mortgage $- $- $- $- $- $- $- $- $- Commercial mortgage loans: Current-period gross writeoffs $- $- $- $- $- $- $- $- $- - ##### [326-20-55-80](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-80) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3b6dbcd56f1e5858921d165579b9aa10305ddf096beabeef55081e8cf2c37d4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates certain of the disclosures in paragraph [326-20-50-14](https://asc.understandingaccounting.org/asc/326/20/#326-20-50-14) by class of financing receivable. - ![](https://asc.understandingaccounting.org/asc-img/GUID-70538EC2-2239-4977-B51A-5E5332635061-low.gif) Age Analysis of Past-Due Financial Assets "As of December 31, 20X5, and 20X4" Past Due 30-59 Days 60-89 Days Greater Than 90 Days Total Current Total Amortized Cost > 90 Days and Accruing 20X5 Commercial " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " Commercial real estate: Commercial real estate construction " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Commercial real estate—other " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer: Consumer—credit card " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer—other " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer—auto " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Residential: Residential—prime " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Residential—subprime " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Finance leases " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Total " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " 20X4 Commercial " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " " $XX,XXX " Commercial real estate: Commercial real estate construction " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Commercial real estate—other " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer: Consumer—credit card " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer—other " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Consumer—auto " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Residential: Residential—prime " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Residential—subprime " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " " XX,XXX " Finance leases ##### [326-20-55-81](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-81) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:e965defc3f5fbffba35ff94d655209335b3b1da0b6200e486ed7fee672b89811 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Reinsurance recoverables may comprise a variety of risks that affect collectibility including: 1. a Credit risk of the reinsurer/assuming company 2. b Contractual coverage disputes between the reinsurer/assuming company and the insurer/ceding company including contract administration issues 3. c Other noncontractual, noncoverage issues including reinsurance billing and allocation issues. ##### [326-20-55-82](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-82) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:572f9077dca44f963aa92a931cdac9242c7aba629b0d91b528a7f930307e2425 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic only requires measurement of expected losses related to the credit risk of the reinsurer/assuming company. ##### [326-20-55-83](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-83) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:1f995a131225c49fde914079c6d1a5086cefa901bc0fc6955ddc0bf6b5bc2a19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In situations in which similar risk characteristics are not present in the reinsurance recoverables, the ceding insurer should measure expected credit losses on an individual basis. Similar risk characteristics may not exist because any one or a combination of the following factors exists, including, but not limited to: 1. a Customized reinsurance agreements associated with individual risk geographies 2. b Different size and financial conditions of reinsurers that may be either domestic or international 3. c Different attachment points among reinsurance agreements 4. d Different collateral terms of the reinsurance agreements (such as collateral trusts or letters of credit) 5. e The existence of state-sponsored reinsurance programs. ##### [326-20-55-84](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-84) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:70893cf0b3e8afb3b462ed44ccd67c474418261065fc32b8920df7c5db661532 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, similar risk characteristics may exist for certain reinsurance recoverables because any one or combination of the following exists: 1. a Reinsurance agreements that have standardized terms 2. b Reinsurance agreements that involve similar insured risks and underwriting practices 3. c Reinsurance counterparties that have similar financial characteristics and face similar economic conditions. ##### [326-20-55-85](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-85) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:c9d20176fd7f323c2aab1f57998cb8e6833b0d89aa8cd0947fa7b472d31ff0b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Judgment should be applied by ceding insurers in determining if and when similar risks exist within their reinsurance recoverables. ##### [326-20-55-86](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-86) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:956a39239a341c1aebdc91832a8d8b8ce1e31bcdf8c1bf404a37a1148c3265ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates the application of the guidance in paragraph [326-20-30-13A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13A) for purchased financial assets with credit deterioration. For purposes of this Example, the acquired portfolio of loans is assumed to share similar risk characteristics and is evaluated for credit losses on a collective basis. ##### [326-20-55-87](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-87) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:4d594c962829351dfd921083f976d385c58439af9f9803808a563bcc9e2a1dd2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Bank Q purchases a portfolio of loans with a par amount of $10 million for $2 million. At acquisition, Bank Q expects to collect $2.5 million on the loan portfolio. Bank Q estimates expected credit losses using a method other than a discounted cash flow method in accordance with paragraph [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4). The acquisition-date journal entry is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-1EC47565-D3A8-4B74-99EF-60A14DF5688B-low.gif) Loan—par amount " $10,000,000 " Loan—noncredit discount " $500,000 " Allowance for credit losses " 7,500,000 " Cash " 2,000,000 " ##### [326-20-55-88](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-88) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:d1e3e49e5fd424a823ce74b76be73c0611543d0fb3aa4a6c459481335638b981 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After acquisition, Bank Q determines that each loan is deemed uncollectible on an individual unit-of-account basis and, therefore, writes off the loan portfolio. The following journal entries are recorded. - ![](https://asc.understandingaccounting.org/asc-img/GUID-77D2FFBA-2E3A-4835-9A29-0840D635E033-low.gif) Provision expense " $2,000,000 " Allowance for credit losses " $2,000,000 " Allowance for credit losses " $9,500,000 " Loan—noncredit discount " 500,000 " Loan—par amount " $10,000,000 " ##### [326-20-55-89](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-89) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:3a48bcd2d88d1d4c9187e4c5e5256517866bda81340cf8c48de192da3ad536a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although deemed uncollectible on an individual basis, when grouped together, the group of loans is expected to have some recoveries on an aggregate basis. Therefore, Bank Q records a negative allowance in accordance with paragraph [326-20-30-13A](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13A). Because Bank Q's expectation of credit conditions has not changed since acquisition, the expected recoveries of $2.5 million must not result in the acceleration of the noncredit discount that existed immediately before being written off. Therefore, the following journal entry is recorded. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4DCAE764-ACD6-4E10-A0F8-B43752710FF2-low.gif) Allowance for credit losses " $2,000,000 " Provision expense " $2,000,000 " ##### [326-20-55-90](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-90) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:41.451Z to 2026-09-09T23:49:41.451Z Record version: sha256:eb0cb1c6ff8c195d780d42cf65dedb715ece4b99469312fa974152fb1a191a1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume the same facts from Example 18. Bank Q subsequently determines that a change in credit conditions has occurred and expects to collect an additional $600,000 (for a total of $3.1 million) on the group of loans. Because Bank Q's expectation of credit conditions has changed and it is determining the amount that it expects to collect using a method other than a discounted cash flow method, the expected recoveries of $3.1 million would be reduced by the noncredit discount of $0.5 million (that has not been accreted). This would result in Bank Q having an overall negative allowance of $2.6 million. Therefore, the following journal entry is recorded. - ![](https://asc.understandingaccounting.org/asc-img/GUID-DF1BBC07-30DF-4C02-98C3-0F1349F3287D-low.gif) Allowance for credit losses " $600,000 " Provision expense " $600,000 " Source downloaded (UTC): 2026-09-09T23:49:47.848Z to 2026-09-09T23:49:47.848Z Record version: sha256:bb4489e46a03d00a554c0542e5e3716f368584bf1b77761e754a3e639f81c306 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/326/20/#sec-00-status) SEC content: yes ##### [326-20-S00-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-S00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:47.848Z to 2026-09-09T23:49:47.848Z Record version: sha256:dbe6163def9d84916cf3cab0cc6fd1b420860cc046d9f3b9c04a391bc97a21da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes that have been made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
326-20-S99-1AddedAccounting Standards Update No. 2020-0202/06/2020
Source downloaded (UTC): 2026-09-09T23:49:55.257Z to 2026-09-09T23:49:55.257Z Record version: sha256:3b59183ccf7a8ac11e87edc4494bbc478708498c578491eff62c901801692707 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/326/20/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [326-20-S99-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:55.257Z to 2026-09-09T23:49:55.257Z Record version: sha256:a9114dd4ea6e1ab1657bb814a112a86f9cf8e54708f24c6cf27cc338719714b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 6.M, Financial Reporting Release No. 28 - Accounting for Loan Losses by Registrants Engaged in Lending Activities Subject to FASB ASC Topic 326. - **1\. Measuring current expected credit losses** - **General:** This staff interpretation applies to all registrants that are creditors in loan transactions that, individually or in the aggregate, have a material effect on the registrant's financial condition.FN74 - FASB ASC Subtopic 326-20 addresses the measurement of current expected credit losses for financial assets measured at amortized cost basis, net investments in leases recognized by lessors, reinsurance recoverables, and certain off-balance-sheet credit exposures.FN75 - At each reporting date, an entity shall record an allowance for credit losses on financial assets measured at amortized cost basis and net investments in leases recognized by lessors and shall record a liability for credit losses on certain off-balance-sheet exposures not accounted for as insurance or derivatives, including loan commitments, standby letters of credit, and financial guarantees.FN76 - For financial asset(s), the allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the financial asset(s) to present the net amount expected to be collected on the financial asset(s).FN77 - The allowance for credit losses is an estimate of current expected credit losses considering available information relevant to assessing collectibility of cash flows over the contractual term of the financial asset(s).FN78 - Information relevant to establishing an estimate of current expected credit losses includes historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. An entity shall report in net income (as a credit loss expense) the amount necessary to adjust the allowance for credit losses and liabilities for credit losses on off-balance-sheet credit exposures for management's current estimate of expected credit losses.FN79 - This staff guidance is applicable upon a registrant's adoption of FASB ASC Topic 326.FN80 Upon a registrant's adoption of FASB ASC Topic 326, the staff guidance in SAB Topic 6, Section L: _Financial Reporting Release No. 28 - Accounting for Loan Losses by Registrants Engaged in Lending Activities_FN81 will no longer be applicable. - On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC's definition, as well as private companies and not-for-profit entities. Nothing in this staff interpretation should be read to accelerate or delay the effective dates of the standard as modified by the FASB. - FN74 This staff interpretation relates to Financial Reporting Release No. 28 - Accounting for Loan Losses by Registrants Engaged in Lending Activities, Release No. 33-6679 (Dec. 1, 1986), (hereinafter “FRR 28”). - FN75 _See_ ASC paragraphs [326-20-15-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-15-2) and [326-20-15-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-15-3). - FN76 _Ibid._ - FN77 _See_ ASC paragraph [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1). - FN78 As indicated in ASC paragraph [326-20-30-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-11), the liability for expected credit losses for off-balance-sheet credit exposures shall be based on the contractual period in which the entity is exposed to credit risk via a present obligation to extend credit, unless the obligation is unconditionally cancellable by the issuer. - FN79 _See_ ASC paragraphs [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1), [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6), [326-20-30-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-7) and [326-20-30-11](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-11). - FN80 _See_ ASC paragraphs [326-10-65-1](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-1), [326-10-65-2](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-2), and [326-10-65-3](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-3). - FN81 Originally added to the Codification of SABs in Topic 6, Section L, by SAB No. 102 - Selected Loan Loss Allowance Methodology and Documentation Issues, 66 FR 36457 (July 12, 2001). - **2\. Development, governance, and documentation of a systematic methodology** - **Facts:** Registrant A is developing (or subsequently reviewing) its allowance for credit losses methodology for its loan portfolio. - **Question 1:** What are some of the factors or elements that the staff normally would expect Registrant A to consider when developing (or subsequently performing an assessment of) its methodology for determining its allowance for credit losses under GAAP? - **Interpretive Response:** The staff normally would expect a registrant to have a systematic methodology to address the development, governance, and documentation to determine its provision and allowance for credit losses. - It is critical that allowance for credit losses methodologies incorporate management's current judgments about the credit losses expected from the existing loan portfolio, including reasonable and supportable forecasts about changes in credit quality of these portfolios, on a disciplined and consistently-applied basis. - A registrant's allowance for credit losses methodology is influenced by entity-specific factors, such as an entity's size, organizational structure, access to information, business environment and strategy, management's risk assessment, complexity of the loan portfolio, loan administration procedures, and management information systems. Management is responsible for the estimate of expected credit losses, and therefore also responsible for determining whether any allowance methodologies developed by third parties are consistent with GAAP. - While different registrants may use different methods,FN82 there are certain common elements that the staff would expect in any methodology: - • Identify relevant risk characteristics and pool loans on the basis of similar risk characteristics;FN83 - • Consider available information relevant to assessing the collectibility of cash flows;FN84 - • Consider expected credit losses over the contractual termFN85 of all existing loans (whether on an individual or group basis), and measure expected credit losses on loans on a collective (pool) basis when similar risk characteristics exist;FN86 - • Require that analyses, estimates, reviews, and other allowance for credit losses methodology functions be performed by competent and well-trained personnel; - • Be based on reliable and relevant data and an analysis of current conditions and reasonable and supportable forecasts; - • Include a systematic and logical method to consolidate the loss estimates that allows for the allowance for credit losses balance to be recorded in accordance with GAAP. - The staff believes an entity's management should review, on a periodic basis, whether its methodology for determining its allowance for credit losses is appropriate. Additionally, for registrants that have audit committees, the staff believes that oversight of the financial reporting and auditing of the allowance for credit losses by the audit committee can strengthen the registrant's process for determining its allowance for credit losses. - A systematic methodology that is properly designed and implemented should result in a registrant's best estimate of its allowance for credit losses.FN87 Accordingly, the staff normally would expect registrants to adjust their allowance for credit losses balance, either upward or downward, in each period for differences between the results of the systematic methodology and the unadjusted allowance for credit losses balance in the general ledger.FN88 - **Question 2:** In the staff's view, what aspects of a registrant's allowance for credit losses internal accounting controls would need to be appropriately addressed in its written policies and procedures? - **Interpretive Response:** Registrants may utilize a wide range of policies, procedures, and control systems in their allowance for credit losses processes, and these policies, procedures, and systems are tailored to the size and complexity of the registrant and its loan portfolio. - However, the staff believes that, in order for a registrant's allowance for credit losses methodology to be effective, the registrant's written policies and procedures for the systems and controls that maintain an appropriate allowance for credit losses would likely address the following: - • The roles and responsibilities of the registrant's departments and personnel (including the lending function, credit review, financial reporting, internal audit, senior management, audit committee, board of directors, and others, as applicable) who determine or review, as applicable, the allowance for credit losses to be reported in the financial statements; - • The registrant's selected methods and policies for developing the allowance for credit losses and determining significant judgments; - • The description of the registrant's systematic methodology, which should be consistent with the registrant's accounting policies for determining its allowance for credit losses (see Question 4 below for further discussion); and - • How the system of internal controls related to the allowance for credit losses process provides reasonable assurance that the allowance for credit losses is in accordance with GAAP. - The staff normally would expect internal accounting controlsFN89 for the allowance for credit losses estimation process to: - • Include measures to provide reasonable assurance regarding the reliability and integrity of information and compliance with laws, regulations, and internal policies and procedures;FN90 and - • Operate at a level of precision sufficient to provide reasonable assurance that the registrant's financial statements are prepared in accordance with GAAP. - **Question 3:** Assume the same facts as in Question 1. What would the staff normally expect Registrant A to include in its documentation of its allowance for credit losses methodology? - **Interpretive Response:** In FRR 28, the Commission provided guidance for documentation of loan loss provisions and allowances for registrants engaged in lending activities. The staff believes that appropriate written supporting documentation for the provision and allowance for credit losses facilitates review of the allowance for credit losses process and reported amounts, builds discipline and consistency into the allowance for credit losses methodology, and helps to evaluate whether relevant factors are appropriately considered in the allowance analysis. - The staff, therefore, normally would expect a registrant to document the relationship between its detailed analysis of the characteristics and credit quality of the portfolio and the amount of the allowance for credit losses reported in each period.FN91 - The staff normally would expect registrants to maintain written supporting documentation for the following decisions and processes: - • Policies and procedures over the systems and controls that maintain an appropriate allowance for credit losses; - • Allowance for credit losses methodology and key judgments, including the data used, assessment of risk, and identification of significant assumptions in the allowance estimation process; - • Summary or consolidation of the allowance for credit losses balance; - • Validation of the allowance for credit losses methodology; and - • Periodic adjustments to the allowance for credit losses. - **Question 4:** What elements of a registrant's allowance for credit losses methodology would the staff normally expect to be described in the registrant's written policies and procedures? - **Interpretive Response:** The staff normally would expect a registrant's written policies and procedures to describe the primary elements of its allowance for credit losses methodology. The staff normally would expect that, in order for a registrant's allowance for credit losses methodology to be effective, the registrant's written policies and procedures would describe all primary elements needed to support a disciplined and consistently-applied methodology, which may include, but is not limited to:FN92 - • How portfolio segments are determined (e.g., by loan type, industry, risk rating, etc.)FN93 and the methodology used for each portfolio segment;FN94 - • The approach used to pool loans based on similar risk characteristics; - • For accounting policy or practical expedient elections set forth in FASB ASC Subtopic 326-20, documentation of the elections made; - • The method(s) used to determine the contractual term of the financial assets, including consideration of prepayments and when the contractual term is extended;FN95 - • If a loss-rate method is used, the historical data used to develop the components of the loss rate and how that rate is applied to the amortized cost basis of the financial asset as of the reporting date;FN96 - • The method for estimating expected recoveries when measuring the allowance for credit losses;FN97 - • The approach used to determine the appropriate historical period for estimating expected credit loss statistics; - • The approach used to determine the reasonable and supportable period; - • The approach used to adjust historical information for current conditions and reasonable and supportable forecasts;FN98 - • How the entity plans to revert to historical credit loss information for periods beyond which the entity is able to make or obtain reasonable and supportable forecasts of expected credit losses;FN99 and - • The approach used to determine when a purchased financial asset would qualify to be accounted for as a purchased financial asset with credit deterioration.FN100 - FN82 ASC paragraph [326-20-30-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-3) states that “the allowance for credit losses may be determined using various methods. For example, an entity may use discounted cash flow methods, loss-rate methods, roll-rate methods, probability-of-default methods, or methods that utilize an aging schedule.” - FN83 _See_ ASC paragraph [326-20-55-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-5) for a list of risk characteristics that may be applicable. - FN84 _See_ ASC paragraph [326-20-30-7](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-7). - FN85 _See_ ASC paragraph [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6). - FN86 _See_ ASC paragraph [326-20-30-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-2). - FN87 ASU 2016-13, BC63 states that “the Board decided that an entity should determine at the reporting date an estimate of credit loss that best reflects its expectations (or its best estimate of expected credit loss).” - FN88 _See_ ASC paragraph [326-20-35-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-1) and [326-20-35-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-3). Registrants should also refer to the guidance on materiality in SAB Topic 1.M. - FN89 Public companies are required to comply with the books and records and internal controls provisions of the Exchange Act. See Sections 13(b)(2) - (7) of the Exchange Act. - FN90 Section 13(b)(2) - (7) of the Exchange Act. - FN91 FRR 28, Section II states that “the specific rationale upon which the loan loss allowance and provision amount actually reported in each individual period is based — _i.e.,_ the bridge between the findings of the detailed review of the loan portfolio and the amount actually reported in each period — would be documented to help ensure the adequacy of the reported amount, to improve auditability, and to serve as a benchmark for exercise of prudent judgment in future periods.” - FN92 _See_ also, ASC paragraph [326-20-55-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-6) for additional judgments a registrant may make. - FN93 FASB ASC Subtopic 326-20-20 defines a portfolio segment as the “level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses.” - FN94 _See_ ASC paragraph [326-20-30-3](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-3) for examples of expected loss estimation methods that may be used. - FN95 _See_ ASC paragraph [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6). - FN96 _See_ ASC paragraph [326-20-30-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-5). - FN97 _See_ ASC paragraph [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1). - FN98 _See_ ASC paragraph [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8) and [326-20-30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-9). - FN99 _See_ ASC paragraph [326-20-30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-9). - FN100 _See_ ASC paragraph [326-20-30-13 through 30-15](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-13) . - **3\. Documenting the results of a systematic methodology** - **Question 5:** What documentation would the staff normally expect a registrant to prepare to support its allowance for credit losses for its loans under FASB ASC Subtopic 326-20? - **Interpretive Response:** - Regardless of the method used to determine the allowance for credit losses under FASB ASC Subtopic 326-20, the staff normally would expect a registrant to demonstrate in its documentation that the loss measurement methods and assumptions used to estimate the allowance for credit losses for its loan portfolio are determined in accordance with GAAP as of the financial statement date. - The staff normally would expect a registrant to maintain as sufficient evidence written documentation to support its measurement of expected credit losses under FASB ASC Subtopic 326-20. That documentation should reflect the method(s) used to estimate expected credit losses for each portfolio segment.FN101 - The staff normally would expect registrants to follow a systematic and consistently-applied approach to select the most appropriate expected credit loss measurement methods and support its conclusions and rationale with written documentation. Typically, registrants decide the methods to use based on many factors, which vary with their business strategies as well as their information system capabilities. - As economic and other business conditions change, registrants often modify their business strategies, which may necessitate adjustments to the methods used to estimate expected credit losses. The staff normally would expect a registrant to maintain a process to evaluate whether adjustments to the methodology are necessary and, if so, maintain documentation to support adjustments to the methodology used. - A registrant's methodology should produce an estimate that is consistent with GAAP. The staff normally would expect that, before employing an expected loss method, a registrant would evaluate and modify, as needed, the method's assumptions related to the current estimate of expected credit losses. Also, the staff expects that registrants would typically document the evaluation, the conclusions regarding the appropriateness of estimating expected credit losses with that method, and the objective support for adjustments to the method or its results. - A registrant shall measure expected credit losses on a collective (pool) basis when similar risk characteristic(s) exist.FN102 The staff normally would expect a registrant to maintain documentation to support its conclusion that the loans in each pool have similar characteristics. - One method of estimating expected credit losses for a pool of loans is through the application of loss rates to the pool's aggregate loan balances.FN103 Such loss rates should generally reflect the registrant's historical credit loss experience consistent with the remaining contractual termsFN104 for each pool of loans, adjusted to reflect the extent to which management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated.FN105 - If a registrant utilizes external data, the staff normally would expect that the registrant would demonstrate in its documentation the relevance and reliability of the external data. The registrant should consider whether the external loss experience data comes from loans with credit attributes similar to those of the loans included in the registrant's portfolio and is consistent with the registrant's assumptions regarding current and forecasted economic conditions.FN106 The staff normally would expect a registrant to maintain supporting documentation for assumptions and data used to develop its loss rates, including its evaluation of the relevance and reliability of any external data. - If a registrant uses the present value of expected future cash flows to measure expected credit losses,FN107 the staff normally would expect supporting documentation for the assumptions and data used to develop the amount and timing of expected cash flows and the effective interest rate used to discount expected cash flows. - If a registrant uses the fair value of collateral to measure expected credit losses, the staff normally would expect the registrant to document: - • The basis for its conclusion that the loan qualifies under GAAP for measurement of expected credit losses based on the fair value of the collateral;FN108 - • How it determined the fair value of the collateral, including policies relating to the use of appraisals, valuation assumptions and calculations, the supporting rationale for adjustments to appraised values, if any, and the determination of costs to sell, if applicable; and - • The recency and reliability of the appraisal or other valuation. - Regardless of the method used, the underlying assumptions used by registrants to develop expected credit loss measurements should consider current conditions and reasonable and supportable forecasts. The staff normally would expect a registrant to document the factors used in the development of the assumptions and how those factors affected the expected credit loss measurements.FN109 Factors to be considered include the following: - • Levels of and trends in delinquencies and performance of loans; - • Levels of and trends in write-offs and recoveries collected; - • Trends in volume and terms of loans; - • Effects of any changes in reasonable and supportable economic forecasts; - • Effects of any changes in risk selection and underwriting standards, and other changes in lending policies, procedures, and practices; - • Experience, ability, and depth of lending management and other relevant staff; - • Available relevant information sources that support or contradict the registrant's own forecast; - • Effects of changes in prepayment expectations or other factors affecting assessments of loan contractual term; - • Industry conditions; and - • Effects of changes in credit concentrations. - Factors affecting collectibility that are not reflected in the registrant's historical loss information should be evaluated to determine whether an adjustment is necessary so that the expected credit loss measurement considers those factors.FN110 For any adjustment of loss measurements based on current conditions and reasonable and supportable forecasts, the staff normally would expect a registrant to maintain sufficient evidence to (a) support the amount of the adjustment and (b) explain why the adjustment is necessary to reflect current conditions and reasonable and supportable forecasts in the expected credit loss measurements. Supporting documentation for adjustments may include relevant economic reports, economic data, and information from individual borrowers. - The staff normally would expect that, as part of the registrant's allowance for credit losses methodology, it would create a summary of the amount and rationale for the adjustment factor for review by management prior to the issuance of the financial statements. The staff normally would expect the nature of the adjustments, how they were measured or determined, and the underlying rationale for making the changes to the allowance for credit losses balance to be documented. The staff also normally would expect appropriate documentation of the adjustments to be provided to management for review of the final allowance for credit losses amount to be reported in the financial statements. - Similarly, the staff normally would expect that registrants would maintain documentation to support the identified range and the rationale used for determining which estimate is the best estimate within the range of expected credit losses and that this documentation would also be made available to the registrant's independent accountants. If changes frequently occur during management or credit committee reviews of the allowance for credit losses, management may find it appropriate to analyze the reasons for the frequent changes and to reassess the methodology the registrant uses. - **Facts:** Registrant H has completed its estimation of its allowance for credit losses for the current reporting period, in accordance with GAAP, using its established systematic methodology. - **Question 6:** What summary documentation would the staff normally expect Registrant H to prepare to support the amount of its allowance for credit losses to be reported in its financial statements? - **Interpretive Response:** The staff normally would expect that, to verify that the allowance for credit losses balances are presented fairly in accordance with GAAP and are auditable, management would prepare a document that summarizes the amount to be reported in the financial statements for the allowance for credit losses,FN111 and that such documentation also include sufficient evidence to support the allowance and internal controls over the allowance. Common elements that the staff normally would expect to find documented in allowance for credit losses summaries include: - • The reasonable and supportable economic forecasts used; - • The estimate of the expected credit losses using the registrant's methodology or methodologies; - • A summary of the current allowance for credit losses balance; - • The amount, if any, by which the allowance for credit losses balance is to be adjusted; and - • Depending on the level of detail that supports the allowance for credit losses analysis, detailed subschedules of loss estimates that reconcile to the summary schedule. - Generally, a registrant's review and approval process for the allowance for credit losses relies upon the data provided in these consolidated summaries. There may be instances in which individuals or committees that review the allowance for credit losses methodology and resulting allowance balance identify adjustments that need to be made to the loss estimates to provide a better estimate of expected credit losses. These changes may occur as a result of holistically evaluating the individual components of the estimation process and considering the overall estimate of the allowance for credit losses as a whole or due to information not known at the time of the initial loss estimate. It would be important that these adjustments be consistent with GAAP and be reviewed and approved by appropriate personnel. Additionally, it would typically be appropriate for the summary to provide each subsequent reviewer with an understanding of the support behind these adjustments. Therefore, the staff normally would expect management to document the nature of any adjustments and the underlying rationale for making the changes. - The staff also normally would expect this documentation to be provided to those among management making the final determination of the allowance for credit losses amount. - FN101 _See supra_ note 20. - FN102 _See_ ASC paragraph [326-20-30-2](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-2). Also refer to ASC paragraph [326-20-55-5](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-5) for a list of risk characteristics that may be applicable. - FN103 _See_ ASC paragraph [326-20-55-18 through 55-22](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-18) for an example illustrating one way an entity may estimate expected credit losses on a portfolio of loans with similar risk characteristics using a loss-rate approach. - FN104 _See_ ASC paragraph [326-20-30-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-6) for guidance on determining the contractual term. - FN105 _See_ ASC paragraph [326-20-30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-9) for guidance related to adjusting historical loss information. - FN106 _See_ ASC paragraph [326-20-30-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-8). - FN107 _See_ ASC paragraph [326-20-30-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-4). - FN108 _See_ ASC paragraph [326-20-35-4 through 35-6](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-4) for guidance regarding when it is appropriate to measure expected credit losses based on the fair value of the collateral as of the reporting date. - FN109 _See_ ASC paragraph [326-20-55-4](https://asc.understandingaccounting.org/asc/326/20/#326-20-55-4) for examples of factors to consider. - FN110 _See_ ASC paragraph [326-20-30-9](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-9) for guidance on when it is not appropriate to make adjustments to historical loss information for forecasted economic conditions. - FN111 _See supra_ note 16. - **4\. Validating a systematic methodology.** - **Question 7:** What is the staff's guidance to a registrant on validating, and documenting the validation of, its systematic methodology used to estimate allowance for credit losses? - **Interpretive Response:** The staff believes that a registrant's allowance for credit losses methodology is considered reasonable when it results in a valuation account that adjusts the net amount of its existing portfolio to cash flows expected to be collected.FN112 - The staff normally would expect the registrant's systematic methodology to include procedures to assess the continued relevance and reliability of methods, data, and assumptions used to estimate expected cash flows. - To verify that the allowance for credit losses methodology is reasonable and conforms to GAAP, the staff believes it would be appropriate for management to establish internal control policies, appropriate for the size of the registrant and the type and complexity of its loan products and modeling methods. - These policies may include procedures for a review, by a party who is independent of the allowance for expected credit losses estimation process, of the allowance methodology and its application in order to confirm its effectiveness. - While registrants may employ many different procedures when assessing the reasonableness of the design and performance of its allowance for credit losses methodology and appropriateness of the data and assumptions used, the procedures should allow management to determine whether there may be deficiencies in its overall methodology. Examples of procedures may include: - • A review of how management's prior assumptions (including expectations regarding loan delinquencies, troubled debt restructurings, write-offs, and recoveries) have compared to actual loan performance; - • A review of the allowance for credit losses process by a party that is independent and possesses competencies on the subject matter. This often involves the independent party reviewing, on a test basis, source documents and underlying data and assumptions to determine that the established methodology develops reasonable loss estimates; - • A retrospective analysis of whether the models used performed in a manner consistent with the intended purpose of developing an estimate of expected credit losses; and - • When the fair value of collateral is used, an evaluation of the appraisal process of the underlying collateral. This may be accomplished by periodically comparing the appraised value to the actual sales price on selected properties sold. - The staff believes that management should support its validation process with documentation of the specific validation procedures performed, including any findings of an independent reviewer. The staff normally would expect that, if the methodology is changed based upon the findings of the validation process, documentation that describes and supports the changes would be maintained. - FN112 _See_ ASC paragraph [326-20-30-1](https://asc.understandingaccounting.org/asc/326/20/#326-20-30-1). Source downloaded (UTC): 2026-09-09T23:49:57.453Z to 2026-09-09T23:50:26.688Z Record version: sha256:bc187479097e8fcb24104934b2d1d93f06ebdc1339e0a46db0dde195027b9807 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30: Financial Instruments—Credit Losses — Available-for-Sale Debt Securities ### Machine-generated study aids ```json { "summary": "ASC 326-30 governs measurement of credit losses on debt securities classified as available-for-sale (AFS), including loans meeting the definition of debt securities classified as AFS. Unlike the pooled CECL model in 326-20, impairment is assessed at the individual security level: when fair value is below amortized cost, the entity determines how much of the decline is credit-related by comparing the present value of expected cash flows with amortized cost, records that amount as an allowance for credit losses (capped at the amount fair value is below amortized cost), and puts the remaining decline in other comprehensive income. If the entity intends to sell or more likely than not must sell before recovery, the allowance is written off and the security is written down to fair value through earnings.", "key_points": [ "An AFS debt security is impaired when fair value is less than amortized cost basis; the credit-related portion is recorded through an allowance for credit losses limited by the amount fair value is below amortized cost, with the non-credit portion recorded in other comprehensive income net of tax (326-30-35-1; 326-30-35-2).", "A credit loss exists when the present value of cash flows expected to be collected, discounted at the effective interest rate implicit in the security at acquisition, is less than the amortized cost basis (326-30-35-6; 326-30-35-7); an entity may elect by major security type to adjust that rate for expected prepayments (326-30-35-7A).", "Impairment must be assessed at the individual security level; a general allowance for unidentified impairment in a portfolio is not appropriate, and a debt security may not be combined with a separate guarantee or credit enhancement contract (326-30-35-4; 326-30-35-5).", "If the entity intends to sell, or more likely than not will be required to sell, before recovery of amortized cost, any allowance is written off and the security is written down to fair value through earnings, and that new amortized cost basis is not adjusted for later recoveries in fair value (326-30-35-10; 326-30-35-14; 326-30-35-15).", "Credit losses are reassessed each reporting period with changes recorded as credit loss expense or reversal, but the allowance may never be reversed below zero (326-30-35-3; 326-30-35-12).", "Purchased AFS debt securities meeting the credit-deterioration indicators in 326-30-55-1 are purchased financial assets with credit deterioration; amortized cost basis equals purchase price plus the allowance, and estimated credit losses are discounted at the rate equating expected cash flows to the purchase price (326-30-30-2; 326-30-30-3).", "AFS debt securities are presented at fair value with amortized cost basis and the allowance shown parenthetically, and disclosures include unrealized losses without an allowance split between less than 12 months and 12 months or longer, methodology and significant inputs, and a tabular allowance rollforward by major security type (326-30-45-1; 326-30-50-4 through 50-6; 326-30-50-7; 326-30-50-9)." ], "categories": [ "Impairment", "Financial instruments", "Subsequent measurement", "Disclosure" ], "audience_level": "intermediate", "student_note": "Exams test the contrast between this AFS model (individual security, allowance capped at the fair value shortfall, non-credit decline to OCI) and the pooled lifetime CECL model in 326-20; a common error is applying a lifetime expected-loss estimate to AFS securities or forgetting the fair value floor on the allowance. Also note that the old permanent \"other-than-temporary impairment\" write-down was replaced by a reversible allowance, except when intent or a required sale forces a write-down to fair value through earnings, and that time in an unrealized loss position alone can never prove no credit loss exists (326-30-55-1).", "related_topics": [ "326-20", "320-10", "325-40", "310-20", "958-320", "815-20" ], "key_concepts": [ "available-for-sale debt securities", "allowance for credit losses", "amortized cost basis", "present value of expected cash flows", "intent or requirement to sell", "purchased financial assets with credit deterioration", "accrued interest receivable policy elections", "unrealized loss disclosures" ] } ``` Source downloaded (UTC): 2026-09-09T23:49:57.453Z to 2026-09-09T23:49:57.453Z Record version: sha256:a9bcf699a8ced0e9e17c8ff3f474bccaeed0306cd0c443b98e1614440b45ac8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/326/30/#00-status) SEC content: no ##### [326-30-00-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:49:57.453Z to 2026-09-09T23:49:57.453Z Record version: sha256:d4208ea24c9d93d9bf37c2d901f9d3271261fcd0ee3131459a6348b22e558f6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Amortized Cost BasisAddedAccounting Standards Update No. 2016-1306/16/2016
Available-for-Sale SecuritiesAddedAccounting Standards Update No. 2016-1306/16/2016
Debt Security (1st def.)AmendedAccounting Standards Update No. 2016-1912/14/2016
Debt Security (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Effective Interest RateAmendedAccounting Standards Update No. 2016-1912/14/2016
Effective Interest RateAddedAccounting Standards Update No. 2016-1306/16/2016
Fair Value (2nd def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (1st def.)SupersededAccounting Standards Update No. 2016-1912/14/2016
Financial Asset (1st def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Financial Asset (2nd def.)AddedAccounting Standards Update No. 2016-1912/14/2016
Holding Gain or LossAddedAccounting Standards Update No. 2016-1306/16/2016
Loan (2nd def.)AddedAccounting Standards Update No. 2016-1306/16/2016
Market ParticipantsAddedAccounting Standards Update No. 2016-1306/16/2016
Orderly TransactionAddedAccounting Standards Update No. 2016-1306/16/2016
Purchased Financial Assets with Credit DeteriorationAmendedAccounting Standards Update No. 2016-1912/14/2016
Purchased Financial Assets with Credit DeteriorationAddedAccounting Standards Update No. 2016-1306/16/2016
Related PartiesAddedAccounting Standards Update No. 2016-1306/16/2016
326-30-05-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-15-1AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-15-2AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-30-1 through 30-4
AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-30-1AAddedAccounting Standards Update No. 2019-0404/25/2019
326-30-30-1BAddedAccounting Standards Update No. 2019-0404/25/2019
326-30-30-2AmendedAccounting Standards Update No. 2016-1912/14/2016
326-30-35-1 through 35-17
AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-35-1AAddedAccounting Standards Update No. 2022-0103/28/2022
326-30-35-4AmendedAccounting Standards Update No. 2022-0103/28/2022
326-30-35-7AAddedAccounting Standards Update No. 2019-0404/25/2019
326-30-35-11AmendedAccounting Standards Update No. 2019-0404/25/2019
326-30-35-13AmendedAccounting Standards Update No. 2019-0404/25/2019
326-30-35-13AAmendedMaintenance Update 2020-18 (PDF)11/25/2020
326-30-35-13AAddedAccounting Standards Update No. 2019-0404/25/2019
326-30-45-1AmendedAccounting Standards Update No. 2019-0404/25/2019
326-30-45-1 through 45-3
AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-50-1 through 50-10
AddedAccounting Standards Update No. 2016-1306/16/2016
326-30-50-3AmendedAccounting Standards Update No. 2016-1912/14/2016
326-30-50-3A through 50-3D
AddedAccounting Standards Update No. 2019-0404/25/2019
326-30-50-4AmendedAccounting Standards Update No. 2019-0404/25/2019
326-30-50-5AmendedAccounting Standards Update No. 2025-1112/08/2025
326-30-50-6AmendedAccounting Standards Update No. 2025-1112/08/2025
326-30-50-8AmendedAccounting Standards Update No. 2025-1112/08/2025
326-30-50-9AmendedAccounting Standards Update No. 2024-0311/04/2024
326-30-55-1 through 55-9
AddedAccounting Standards Update No. 2016-1306/16/2016
Source downloaded (UTC): 2026-09-09T23:50:00.260Z to 2026-09-09T23:50:00.260Z Record version: sha256:c1227973880d4c93f08a6acb4326ac401e939617f8086557173135f82f340850 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-05: 05 Background [Read section](https://asc.understandingaccounting.org/asc/326/30/#05-background) SEC content: no ##### [326-30-05-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:00.260Z to 2026-09-09T23:50:00.260Z Record version: sha256:705b5d6d4a12b3c31a2b273dd6e7489651e1875f7e15a93588e041dd327052a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on how an entity should measure credit losses on available-for-sale debt securities. Source downloaded (UTC): 2026-09-09T23:50:03.959Z to 2026-09-09T23:50:03.959Z Record version: sha256:31a125c74910e089e3c20fc41e2675c0bfd0b6a536ef596dd303e1e905f309d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-15: 15 Scope [Read section](https://asc.understandingaccounting.org/asc/326/30/#15-scope) SEC content: no #### Entities ##### [326-30-15-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:03.959Z to 2026-09-09T23:50:03.959Z Record version: sha256:ce54843677e827295f6e7a711d0416a766fdcc5f72e1d7843f1b5af3673441e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. #### Instruments ##### [326-30-15-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:03.959Z to 2026-09-09T23:50:03.959Z Record version: sha256:c42115031c6173fa63b2184c3eb0bd2e2bd92c3685758416cf49f31aa19ac694 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to [debt securities](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.") classified as [available-for-sale securities](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities."), including [loans](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.") that meet the definition of _debt securities_ and are classified as available-for-sale securities. Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:515a5845f2fc1cc9f2ee99fc44b6c87b637f41f8a214190f34050303ae109f34 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/326/30/#30-initial-measurement) SEC content: no ##### [326-30-30-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:73a300602dc17ffb47315834b9699baddd76a32b8e2cc517f3cce0b5b2b825e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Throughout this Subtopic, the term _earnings_ shall be read as _performance indicator_, and _other comprehensive income_ shall be read as _outside the performance indicator_ for [debt securities](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.") that are within the scope of Subtopic 958-320 on debt securities of not-for-profit entities. ##### [326-30-30-1A](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-1A) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:9a4997e194d6b33a2a42fcf819febb1bcb6b30867f52047f8a65f8bd2dd76948 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If for the purposes of identifying and measuring an impairment the applicable accrued interest is excluded from both 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.") and 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.") of the available-for-sale debt security, an entity may develop its estimate of expected credit losses by measuring components of the amortized cost basis on a combined basis or by separately measuring the applicable accrued interest component from the other components of amortized cost basis. ##### [326-30-30-1B](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-1B) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:d15f4232df702c24d61561752a9a23d7979ad13992f4712d2ee8c577d9447964 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity excludes applicable accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt security, the entity may make an accounting policy election, at the major security-type level, not to measure an allowance for credit losses for accrued interest receivables if it writes off the uncollectible accrued interest receivable balance in a timely manner. An entity that elects the accounting policy in this paragraph shall meet the disclosure requirements in paragraph [326-30-50-3C](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3C). This accounting policy election shall be considered separately from the accounting policy election in paragraph [326-30-35-13A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-13A). An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. #### Purchased Financial Assets with Credit Deterioration ##### [326-30-30-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:9a9e5e9869d142f2e07485ce156ed341903d39cc260c2550f90feec6eb9a1d1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A purchased [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.") classified as available-for-sale shall be considered to be a [purchased financial asset with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") when the indicators of a credit loss in paragraph [326-30-55-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) have been met. The allowance for credit losses for purchased [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") with credit deterioration shall be measured at the individual security level in accordance with paragraphs [326-30-35-3 through 35-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-3) . 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.") for purchased financial assets with credit deterioration shall be considered to be the purchase price plus any allowance for credit losses. See paragraphs [326-30-55-1 through 55-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) for implementation guidance. ##### [326-30-30-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:5f291e55e0a81881f643992abea60e5f0fd8f10d5159846067c1b04d6615e3fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimated credit losses shall be discounted at the rate that equates the present value of the purchaser's estimate of the security's future cash flows with the purchase price of the asset. ##### [326-30-30-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:10.971Z to 2026-09-09T23:50:10.971Z Record version: sha256:2661fddcaf9e737e36deb4261ba1180590637e113115469aba0fe3463659bedd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall record the [holding gain or loss](https://asc.understandingaccounting.org/glossary/h/#holding-gain-or-loss "The net change in fair value of a security. The holding gain or loss does not include dividend or interest income recognized but not yet received, writeoffs, or the allowance for credit losses.") through other comprehensive income, net of applicable taxes. Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:93dbcca7268f067b7d835820dbeb7f3f79e57df6b2427b0a1b5dcf72d696f84a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/326/30/#35-subsequent-measurement) SEC content: no #### Impairment of Individual Available-for-Sale Securities ##### [326-30-35-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:e3728297512234a01c29653af11eeba71d682f8b47e384da9b9ed826f9d9d502 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investment is impaired if 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.") of the investment is less than its [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."). ##### [326-30-35-1A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-1A) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:22e8bab9acb2c3d3e8154b98c115856a329c291a681f66dfd9253e9f98fd279d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall not consider a basis adjustment related to an existing portfolio layer method hedge designated in accordance with paragraph [815-20-25-12A](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-12A) when measuring impairment of the individual investments or individual beneficial interest included in a closed portfolio hedged using the portfolio layer method. ##### [326-30-35-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:fed680689407207e794727710ed25f0d98f5a003defa1f5f349fe2c5c76f30be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For individual [debt securities](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.") classified as [available-for-sale securities](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities."), an entity shall determine whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An entity shall record impairment relating to credit losses through an allowance for credit losses. However, the allowance shall be limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded through an allowance for credit losses shall be recorded through other comprehensive income, net of applicable taxes. An entity shall consider the guidance in paragraphs [326-30-35-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-6) and [326-30-55-1 through 55-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) when determining whether a credit loss exists. ##### [326-30-35-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:57d1d24841bd098b4abf7ffc41632847cb923213823e429de9c20fe9b3ab64eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At each reporting date, an entity shall record an allowance for credit losses that reflects the amount of the impairment related to credit losses, limited by the amount that fair value is less than the amortized cost basis. Changes in the allowance shall be recorded in the period of the change as credit loss expense (or reversal of credit loss expense). ##### [326-30-35-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:a57da4ea2e59aadef57c9520aaeb7fdde4e3208bcdccc8ea11c4331ff5741647 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Impairment shall be assessed at the individual security level (referred to as an investment). The impairment assessment of the individual securities or individual beneficial interest in a closed portfolio hedged using the portfolio layer method shall not consider the basis adjustment related to an existing portfolio layer method hedge. Individual security level means the level and method of aggregation used by the reporting entity to measure realized and unrealized gains and losses on its debt securities. (For example, debt securities bearing the same Committee on Uniform Security Identification Procedures \[CUSIP\] number that were purchased in separate trade lots may be aggregated by a reporting entity on an average cost basis if that corresponds to the basis used to measure realized and unrealized gains and losses for the debt securities.) Providing a general allowance for an unidentified impairment in a portfolio of debt securities is not appropriate. ##### [326-30-35-5](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:08d3134fe0f621b24e1dc3afcd297c58c5170a75accf49a5de507a6db53c2986 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall not combine separate contracts (a debt security and a guarantee or other credit enhancement) for purposes of determining whether a debt security is impaired or can contractually be prepaid or otherwise settled in such a way that the entity would not recover substantially all of its cost. ##### [326-30-35-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:32a87152fba0ada84958264d1c1f4bfe225bf6aaf2d0dbcf5e3906878aee0e60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In assessing whether a credit loss exists, an entity shall compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an allowance for credit losses shall be recorded for the credit loss, limited by the amount that 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 amortized cost basis. Credit losses on an impaired security shall continue to be measured using the present value of expected future cash flows. ##### [326-30-35-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:51cdcb6436700cef8cbc0d8b00b402dbd0bc30a4a881280c2b4079fab9b09648 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining whether a credit loss exists, an entity shall consider the factors in paragraphs [326-30-55-1 through 55-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) and use its best estimate of the present value of cash flows expected to be collected from the [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."). One way of estimating that amount would be to consider the methodology described in paragraphs [326-30-35-8 through 35-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-8) . Briefly, the entity would discount the expected cash flows at the [effective interest rate](https://asc.understandingaccounting.org/glossary/e/#effective-interest-rate "The rate of return implicit in the financial asset, that is, the contractual interest rate adjusted for any net deferred fees or costs, premium, or discount existing at the origination or acquisition of the financial asset. For purchased financial assets with credit deterioration, however, to decouple interest income from credit loss recognition, the premium or discount at acquisition excludes the discount embedded in the purchase price that is attributable to the acquirer's assessment of credit losses at the date of acquisition.") implicit in the security at the date of acquisition. ##### [326-30-35-7A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-7A) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:877fdddfb24f47f972ab7be0dae655fd95cba6de1fe33c8db0f6353a6eb6d40a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As an accounting policy election for each major security type of debt securities classified as available-for-sale securities, an entity may adjust the effective interest rate used to discount expected cash flows to consider the timing (and changes in the timing) of expected cash flows resulting from expected prepayments. ##### [326-30-35-8](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:503133715e4fd97e7d4a110622a6e08168fdf342356780d59019a83df583da6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimates of expected future cash flows shall be the entity's best estimate based on past events, current conditions, and on reasonable and supportable forecasts. Available evidence shall be considered in developing the estimate of expected future cash flows. The weight given to the information used in the assessment shall be commensurate with the extent to which the evidence can be verified objectively. If an entity estimates a range for either the amount or timing of possible cash flows, the likelihood of the possible outcomes shall be considered in determining the best estimate of expected future cash flows. ##### [326-30-35-9](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:797c3794998dfd9c96dfd866eb24e624dc536f7cde664a36a827552e4fd6a8ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Available information would include existing environmental factors, for example, existing industry, geographical, economic, and political factors that are relevant to the collectibility of that debt security. ##### [326-30-35-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:b749e8003238b96e755fee91a1f354032d3578520df32ceeff3a6940df460636 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity intends to sell the debt security (that is, it has decided to sell the security), or more likely than not will be required to sell the security before recovery of its amortized cost basis, any allowance for credit losses shall be written off and the amortized cost basis shall be written down to the debt security's fair value at the reporting date with any incremental impairment reported in earnings. If an entity does not intend to sell the debt security, the entity shall consider available evidence to assess whether it more likely than not will be required to sell the security before the recovery of its amortized cost basis (for example, whether its cash or working capital requirements or contractual or regulatory obligations indicate that the security will be required to be sold before the forecasted recovery occurs). In assessing whether the entity more likely than not will be required to sell the security before recovery of its amortized cost basis, the entity shall consider the factors in paragraphs [326-30-55-1 through 55-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-55-1) . ##### [326-30-35-11](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:b13e439662d5da3809de403f4f5154cc1e6e9938605ce91291085d096e557134 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the security's contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, for example, the prime rate, the London Interbank Offered Rate (LIBOR), or the U.S. Treasury bill weekly average, that security's effective interest rate (used to discount expected cash flows as described in paragraph [326-30-35-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-7)) may be calculated based on the factor as it changes over the life of the security or is projected to change over the life of the security, or may be fixed at the rate in effect at the date an entity determines that the security has a credit loss as determined in accordance with paragraphs [326-30-35-1 through 35-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-1) . The entity's choice shall be applied consistently for all securities whose contractual interest rate varies based on subsequent changes in an independent factor. An entity is not required to project changes in the factor for purposes of estimating expected future cash flows. If the entity projects changes in the factor for the purposes of estimating expected future cash flows, it shall use the same projections in determining the effective interest rate used to discount those cash flows. In addition, if the entity projects changes in the factor for the purposes of estimating expected future cash flows, it shall adjust the effective interest rate used to discount expected cash flows to consider the timing (and changes in the timing) of expected cash flows resulting from expected prepayments in accordance with paragraph [326-30-35-7A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-7A). Subtopic 310-20 on receivables—nonrefundable fees and other costs provides guidance on the calculation of interest income for variable rate instruments. #### Accounting for Debt Securities after a Credit Impairment ##### [326-30-35-12](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:2e499003db0ea5dfd8a9a991c5d9583755f9f699e07f2fc5947637a449572aa5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall reassess the credit losses each reporting period when there is an allowance for credit losses. An entity shall record subsequent changes in the allowance for credit losses on available-for-sale debt securities with a corresponding adjustment recorded in the credit loss expense on [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.")[debt securities](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."). An entity shall not reverse a previously recorded allowance for credit losses to an amount below zero. ##### [326-30-35-13](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:7d46ed8583deebca6e77bc634de2d45117b20380cee4bdfe097dad9785d585f8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize writeoffs of available-for-sale debt securities in accordance with paragraph [326-20-35-8](https://asc.understandingaccounting.org/asc/326/20/#326-20-35-8). ##### [326-30-35-13A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-13A) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:5e3881699ebda276da044f7ed6969311dc1173c7420317b12e855c46f7977ea0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If for the purposes of identifying and measuring an impairment the applicable accrued interest is excluded from both 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.") and 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.") of the available-for-sale debt security, an entity may make an accounting policy election, at 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 shall be considered separately from the accounting policy election in paragraph [326-30-30-1B](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-1B). An entity that elects this accounting policy shall meet the disclosure requirements in paragraph [326-30-50-3D](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3D). An entity may not analogize this guidance to components of amortized cost basis other than accrued interest. #### Accounting after a Write-Down Resulting from an Intent to Sell or a More-Likely-Than-Not Requirement to Sell ##### [326-30-35-14](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:b943b258a4b0a1f064ae6e79636dc597e5cf946385d1be826a447a49759b6f95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Once an individual [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.") has been written down in accordance with paragraph [326-30-35-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-10), the previous [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.") less writeoffs, including non-credit-related impairment reported in earnings, shall become the new amortized cost basis of the investment. That new amortized cost basis shall not be adjusted for subsequent recoveries in [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."). ##### [326-30-35-15](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:6e099457bb967f2efbf268b904a5e8ffdae76f033308f5e736aa05cbd2903620 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For debt securities for which impairments were reported in earnings as a writeoff because of an intent to sell or a more-likely-than-not requirement to sell, the difference between the new amortized cost basis and the cash flows expected to be collected shall be accreted in accordance with existing applicable guidance as interest income. An entity shall continue to estimate the present value of cash flows expected to be collected over the life of the debt security. For debt securities accounted for in accordance with Subtopic 325-40, an entity should look to that Subtopic to account for changes in cash flows expected to be collected. For all other debt securities, if upon subsequent evaluation, there is a significant increase in the cash flows expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, those changes shall be accounted for as a prospective adjustment to the yield. Subsequent increases in the fair value of available-for-sale securities after the write-down shall be included in other comprehensive income. (This Section does not address when a holder of a debt security would place a debt security on nonaccrual status or how to subsequently report income on a nonaccrual debt security.) #### Purchased Financial Assets with Credit Deterioration ##### [326-30-35-16](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:175978f897774d806b53b28b26f9c9f8ab6d8b79dc56a58aa8fa25b919acfd79 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall measure changes in the allowance for credit losses on a [purchased financial asset with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") in accordance with paragraph [326-30-35-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-6). The entity shall report changes in the allowance for credit losses in net income as credit loss expense (or reversal of credit loss expense) in each reporting period. ##### [326-30-35-17](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:14.904Z to 2026-09-09T23:50:14.904Z Record version: sha256:681cf01c8218a10921830e18cb41c00fdd97d8980bbf9e487d9a602985857053 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not address how an entity shall recognize interest income. See paragraphs [310-10-35-53A through 35-53C](https://asc.understandingaccounting.org/asc/310/10/#310-10-35-53A) for guidance on recognition of interest income on purchased financial assets with credit deterioration. Source downloaded (UTC): 2026-09-09T23:50:17.868Z to 2026-09-09T23:50:17.868Z Record version: sha256:c7db270fbdcaddfe24aff7fc5223b57fca57487375a616f0e85c6ef0de9e03d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/326/30/#45-other-presentation-matters) SEC content: no ##### [326-30-45-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:17.868Z to 2026-09-09T23:50:17.868Z Record version: sha256:7ef46ef37ba5b407b7629d5f876d487b094c4ff563e9720cd4b976fb8fd20039 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall present [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.")[debt securities](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.") on the statement of financial position at [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."). In addition, an entity shall present parenthetically 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.") and the allowance for credit losses. If for the purposes of identifying and measuring an impairment the applicable accrued interest is excluded from both the fair value and the amortized cost basis of the available-for-sale debt security, an entity may present separately on the statement of financial position or within another statement of financial position line item the accrued interest receivable balance, net of the allowance for credit losses (if any). An entity that presents the accrued interest receivable balance, net of the allowance for credit losses (if any), within another statement of financial position line item shall apply the disclosure requirements in paragraph [326-30-50-3A](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3A). ##### [326-30-45-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:17.868Z to 2026-09-09T23:50:17.868Z Record version: sha256:4edd4cf567b4378baef6f7f6a386b19ce80425e739a723e8a5b695a42f8d88cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall separately present, in the financial statement in which the components of accumulated other comprehensive income are reported, amounts reported therein related to available-for-sale debt securities for which an allowance for credit losses has been recorded. ##### [326-30-45-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:17.868Z to 2026-09-09T23:50:17.868Z Record version: sha256:90a536c2f73ae472cac7a760c00033c99e603d2663acfc19c06ded9c123e31ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity applies the guidance in paragraph [326-30-35-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-7), the change in present value of cash flows expected to be collected from one reporting period to the next may result not only from the passage of time but also from changes in estimates of the timing or amount of expected future cash flows. An entity is permitted to report the entire change in present value as a credit loss expense (or a reversal of credit loss expense). Alternatively, an entity may report the change in present value attributable to the passage of time as interest income. See paragraph [326-30-50-8](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-8) for a disclosure requirement applicable to creditors that choose the latter alternative and report changes in present value attributable to the passage of time as interest income. Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:7e63296b8ec08f140a1b6d8b798491785f6cbdd5fc975ebd4a7054bb7b632c14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 326-30-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/326/30/#50-disclosure) SEC content: no ##### [326-30-50-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:fbdeefe537b3b8af2a5794450cbacb9f682c9f0ad1a7a7c20f413e66d631f5bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For instruments within the scope of this Subtopic, this Section provides the following disclosure guidance related to credit risk and the measurement of credit losses: 1. a [Available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [debt securities](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.") in unrealized loss positions without an allowance for credit losses 2. b Allowance for credit losses 3. c [Purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis."). ##### [326-30-50-2](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:dd06c07eec3ee1b969ea3751120dc6671f2275d3826b50d34d7287f62c8fe838 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosure guidance in this Section should enable a user of the financial statements to understand the following: 1. a The credit risk inherent in available-for-sale debt securities 2. b Management's estimate of credit losses 3. c Changes in the estimate of credit losses that have taken place during the period. ##### [326-30-50-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:6647c715f05ce9d87fe4f7ccb02fbe7a06f4afac592df6c25f1a04522045b598 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall determine, in light of the facts and circumstances, how much detail it must provide to satisfy the disclosure requirements in this Section and how it disaggregates information into major security types. An entity must strike a balance between obscuring important information as a result of too much aggregation and overburdening financial statements with excessive detail that may not assist a financial statement user to understand an entity's securities and allowance for credit losses. For example, an entity should not obscure important information by including it with a large amount of insignificant detail. Similarly, an entity should not disclose information that is so aggregated that it obscures important differences between the different types of [financial assets](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") and associated risks. ##### [326-30-50-3A](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3A) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:8b2c1e78175856ea9e6b4febf306dbb2562107e20433d8e231ee5ef0bdf7b79f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes the accounting policy election to present separately the accrued interest receivable balance within another statement of financial position line item as described in paragraph [326-30-45-1](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-1) shall disclose the amount of applicable accrued interest, net of the allowance for credit losses (if any), and shall disclose in which line item on the statement of financial position that amount is presented. ##### [326-30-50-3B](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3B) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:8df6c41c14ea0bdcef91a3f3fcea7bbf0f37fb181400c5245c9bb1e489d0b4c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If for the purposes of identifying and measuring an impairment the applicable accrued interest is excluded from both 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.") and 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.") of the available-for-sale debt security, an entity may, as a practical expedient, exclude the applicable accrued interest that is included in the amortized cost basis for the purposes of the disclosure requirements in paragraphs [326-30-50-4 through 50-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) . If an entity elects this practical expedient, it shall disclose the total amount of accrued interest, net of the allowance for credit losses (if any), excluded from the disclosed amortized cost basis. ##### [326-30-50-3C](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3C) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:ba8671536ab22da4567b2186d64f33b18cfe188e6e1c95e23b4caf5d744a88e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes the accounting policy election in paragraph [326-30-30-1B](https://asc.understandingaccounting.org/asc/326/30/#326-30-30-1B) shall disclose its accounting policy not to measure an allowance for credit losses for accrued interest receivables. The accounting policy shall include information about what time period or periods, at the major security-type level, are considered timely. ##### [326-30-50-3D](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-3D) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:81b2afc55397dbf62efe14f73674237edcbd7c199767343288ed8dd987bcba79 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity that makes the accounting policy election in paragraph [326-30-35-13A](https://asc.understandingaccounting.org/asc/326/30/#326-30-35-13A) shall disclose its accounting policy to write off accrued interest receivables by reversing interest income or recognizing credit loss expense or a combination of both. The entity also shall disclose the amount of accrued interest receivables written off by reversing interest income by major security type. #### Available-for-Sale Debt Securities in Unrealized Loss Positions without an Allowance for Credit Losses ##### [326-30-50-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:62cf64e6977462aad5b97ba29c3581e92617cb14fa73c3bebf3f52c4cf06038f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [debt securities](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."), including those that fall within the scope of Subtopic 325-40 on beneficial interests in securitized financial assets, in an unrealized loss position for which an allowance for credit losses has not been recorded, an entity shall disclose all of the following in its interim and annual financial statements: 1. a As of each date for which a statement of financial position is presented, quantitative information, aggregated by category of investment—each major security type that the entity discloses in accordance with this Subtopic—in tabular form: 1. 1 The aggregate related fair value of investments with unrealized losses 2. 2 The aggregate amount of unrealized losses (that is, the amount by which amortized cost basis exceeds fair value). 2. b As of the date of the most recent statement of financial position, additional information (in narrative form) that provides sufficient information to allow a financial statement user to understand the quantitative disclosures and the information that the entity considered (both positive and negative) in reaching the conclusion that an allowance for credit losses is unnecessary. The disclosures required may be aggregated by investment categories, but individually significant unrealized losses generally shall not be aggregated. This disclosure could include all of the following: 1. 1 The nature of the investment(s) 2. 2 The cause(s) of the impairment(s) 3. 3 The number of investment positions that are in an unrealized loss position 4. 4 The severity of the impairment(s) 5. 5 Other evidence considered by the investor in reaching its conclusion that an allowance for credit losses is not necessary, including, for example, any of the following: 1. i Performance indicators of the underlying assets in the security, including any of the following: 1. 01 Default rates 2. 02 Delinquency rates 3. 03 Percentage of nonperforming assets. 2. ii Debt-to-collateral-value ratios 3. iii Third-party guarantees 4. iv Current levels of subordination 5. v Vintage 6. vi Geographic concentration 7. vii Industry analyst reports 8. viii Credit ratings 9. ix Volatility of the security's fair value 10. x Interest rate changes since purchase 11. xi Any other information that the investor considers relevant. ##### [326-30-50-5](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-5) Pending content: yes Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:b20e59d1d535ca122513aff78f1c2806dbcb709ba2d7331dd3465fea2460f755 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosures in (a)(1) through (a)(2) in paragraph [326-30-50-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) shall be disaggregated by those investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)For interim and annual reporting periods, the disclosures in (a)(1) through (a)(2) in paragraph [326-30-50-4](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-4) shall be disaggregated by those investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or longer. ##### [326-30-50-6](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-6) Pending content: yes Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:fe5c873b4f9a76fbf548aa360c8f5c8e376448e5a189b55fe96d98d32d7ef6ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The reference point for determining how long an investment has been in a continuous unrealized loss position is the balance sheet date of the reporting period in which the impairment is identified. For entities that do not prepare interim financial information, the reference point is the annual balance sheet date of the period during which the impairment was identified. The continuous unrealized loss position ceases upon the investor becoming aware of a recovery of fair value up to (or beyond) the amortized cost basis of the investment during the period. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)The reference point for determining how long an investment has been in a continuous unrealized loss position is the balance sheet date of the reporting period in which the impairment is identified. For entities that do not prepare interim financial statements and notes in accordance with generally accepted accounting principles, the reference point is the annual balance sheet date of the period during which the impairment was identified. The continuous unrealized loss position ceases upon the investor becoming aware of a recovery of fair value up to (or beyond) the amortized cost basis of the investment during the period. #### Allowance for Credit Losses ##### [326-30-50-7](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:e3a15a95fd7aa5dc77bceb196d06419a6ac8ac7c9513733a92d003897a5fca09 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For interim and annual periods in which an allowance for credit losses of an [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [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.") is recorded, an entity shall disclose by major security type, the methodology and significant inputs used to measure the amount related to credit loss, including its accounting policy for recognizing writeoffs of uncollectible available-for-sale debt securities. Examples of significant inputs include, but are not limited to, all of the following: 1. a Performance indicators of the underlying assets in the security, including all of the following: 1. 1 Default rates 2. 2 Delinquency rates 3. 3 Percentage of nonperforming assets 2. b Debt-to-collateral-value ratios 3. c Third-party guarantees 4. d Current levels of subordination 5. e Vintage 6. f Geographic concentration 7. g Industry analyst reports and forecasts 8. h Credit ratings 9. i Other market data that are relevant to the collectibility of the security. ##### [326-30-50-8](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-8) Pending content: yes Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:9efa33e6ff8d492bc12d8accf2268d925e1c28a6f8c0b56042537ed3ec5b0120 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [326-30-45-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-3) explains that an entity may report the change in the allowance for credit losses due to changes in time value as credit loss expense (or reversal of credit loss expense) but also may report the change as interest income. An entity that chooses the latter alternative shall disclose the amount recorded to interest income that represents the change in present value attributable to the passage of time. Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [270-10-65-1](https://asc.understandingaccounting.org/asc/270/10/#270-10-65-1)Paragraph [326-30-45-3](https://asc.understandingaccounting.org/asc/326/30/#326-30-45-3) explains that an entity may report the change in the allowance for credit losses due to changes in time value as credit loss expense (or reversal of credit loss expense) but also may report the change as interest income. An entity that chooses the latter alternative shall disclose in interim and annual reporting periods the amount recorded to interest income that represents the change in present value attributable to the passage of time. ##### [326-30-50-9](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-9) Pending content: yes Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:9d6c9ffb45ebecaa8261e1f109a419ad6dcc93c6a084f3ef76294ff5a6b503b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each interim and annual reporting period presented, an entity shall disclose by major security type, a tabular rollforward of the allowance for credit losses, which shall include, at a minimum, all of the following: 1. a The beginning balance of the allowance for credit losses on [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [debt securities](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.") held by the entity at the beginning of the period 2. b Additions to the allowance for credit losses on securities for which credit losses were not previously recorded 3. c Additions to the allowance for credit losses arising from purchases of available-for-sale debt securities accounted for as purchased financial assets with credit deterioration (including beneficial interests that meet the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)) 4. d Reductions for securities sold during the period (realized) 5. e Reductions in the allowance for credit losses because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its [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.") 6. f If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, additional increases or decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period 7. g Writeoffs charged against the allowance 8. h Recoveries of amounts previously written off 9. i The ending balance of the allowance for credit losses related to debt securities held by the entity at the end of the period. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [220-40-65-1](https://asc.understandingaccounting.org/asc/220/40/#220-40-65-1)For each interim and annual reporting period presented, an entity shall disclose by major security type, a tabular rollforward of the allowance for credit losses, which shall include, at a minimum, all of the following: 1. a The beginning balance of the allowance for credit losses on [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [debt securities](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.") held by the entity at the beginning of the period 2. b Additions to the allowance for credit losses on securities for which credit losses were not previously recorded 3. c Additions to the allowance for credit losses arising from purchases of available-for-sale debt securities accounted for as purchased financial assets with credit deterioration (including beneficial interests that meet the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)) 4. d Reductions for securities sold during the period (realized) 5. e Reductions in the allowance for credit losses because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its [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.") 6. f If the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, additional increases or decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period 7. g Writeoffs charged against the allowance 8. h Recoveries of amounts previously written off 9. i The ending balance of the allowance for credit losses related to debt securities held by the entity at the end of the period. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. #### Purchased Financial Assets with Credit Deterioration ##### [326-30-50-10](https://asc.understandingaccounting.org/asc/326/30/#326-30-50-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:50:22.028Z to 2026-09-09T23:50:22.028Z Record version: sha256:9765b4d8cdc2f7786944ccb9c7178f05af2f370cb5463c8ee1873411118514fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent an entity acquired [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") during the current reporting period, an entity shall provide a reconciliation of the difference between the purchase price of the assets and the par value of the [available-for-sale](https://asc.understandingaccounting.org/glossary/a/#available-for-sale-securities "Investments not classified as either trading securities or as held-to-maturity securities.") [debt securities](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."), including: 1. a The purchase price 2. b The allowance for credit losses at the acquisition date based on the acquirer's assessment 3. c The discount (or premium) attributable to other factors 4. d The par value. 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.