# ASC 340-948: Other Assets and Deferred Costs — Financial Services—Mortgage Banking

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/340/948/)

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## ASC 340-948: Other Assets and Deferred Costs — Financial Services—Mortgage Banking

### Machine-generated study aids

```json
{
  "summary": "This Subtopic governs the accounting for the cost of issuing certain Government National Mortgage Association (GNMA) securities by mortgage banking entities. Issuers electing the internal reserve method must capitalize the one month's interest cost required to be paid to a trustee (340-948-25-1), subject to a ceiling equal to the present value of net future servicing income (340-948-30-1). The capitalized amount is then amortized in proportion to, and over the period of, estimated net servicing income (340-948-35-1).",
  "key_points": [
    "One month's interest cost that issuers of GNMA securities electing the internal reserve method must pay to a trustee shall be capitalized (340-948-25-1).",
    "The aggregate amount capitalized, including amounts capitalized under other provisions of the Subtopic, shall not exceed the present value of net future servicing income, discounted at an appropriate long-term interest rate (340-948-30-1).",
    "Estimated future servicing revenue used in the ceiling test includes expected late charges and other ancillary revenue (340-948-30-1).",
    "Estimated future servicing costs include direct costs of performing the servicing function plus appropriate allocations of other costs, and may be determined on an incremental cost basis (340-948-30-1).",
    "The capitalized amount is amortized in proportion to, and over the period of, estimated net servicing income—the excess of servicing revenues over servicing costs (340-948-35-1).",
    "The scope of this Subtopic follows the Overall Subtopic scope in Section 948-10-15 (340-948-15-1)."
  ],
  "categories": [
    "Initial measurement",
    "Subsequent measurement",
    "Industry-specific",
    "Recognition"
  ],
  "audience_level": "intermediate",
  "student_note": "This is a narrow, industry-specific deferral rule: the one month's trustee interest is an asset, not an immediate expense, but only up to the present value of net future servicing income. A common misunderstanding is treating the cap as applying only to this cost—it is an aggregate ceiling that includes amounts capitalized under other provisions of Topic 948.",
  "related_topics": [
    "948-10",
    "860-50",
    "948-310",
    "835-30"
  ],
  "key_concepts": [
    "gnma securities",
    "internal reserve method",
    "capitalized issuance cost",
    "present value of net future servicing income",
    "servicing revenues and costs",
    "amortization of deferred costs",
    "mortgage banking"
  ]
}
```

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## ASC 340-948-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/340/948/#05-overview-and-background)

SEC content: no

##### [340-948-05-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-05-1)

Pending content: no

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This Subtopic addresses the accounting for costs of issuing certain [Government National Mortgage Association](https://asc.understandingaccounting.org/glossary/g/#government-national-mortgage-association "Often referred to as Ginnie Mae, GNMA is a U.S. governmental agency that guarantees certain types of mortgage-backed securities and provides funds for and administers certain types of low-income housing assistance programs.") (GNMA) securities.

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## ASC 340-948-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/340/948/#15-scope-and-scope-exceptions)

SEC content: no

#### Overall Guidance

##### [340-948-15-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-15-1)

Pending content: no

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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 948-10-15.

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## ASC 340-948-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/340/948/#25-recognition)

SEC content: no

#### Costs of Issuing Certain GNMA Securities

##### [340-948-25-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-25-1)

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One month's interest cost, which is required to be paid to a trustee by issuers of [Government National Mortgage Association](https://asc.understandingaccounting.org/glossary/g/#government-national-mortgage-association "Often referred to as Ginnie Mae, GNMA is a U.S. governmental agency that guarantees certain types of mortgage-backed securities and provides funds for and administers certain types of low-income housing assistance programs.") (GNMA) securities electing the [internal reserve method](https://asc.understandingaccounting.org/glossary/i/#internal-reserve-method "A method for making payments to investors for collections of principal and interest on mortgage loans by issuers of Government National Mortgage Association (GNMA) securities. An issuer electing the internal reserve method is required to deposit in a custodial account an amount equal to one month's interest on the mortgage loans that collateralize the GNMA security issued."), shall be capitalized.

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## ASC 340-948-30: 30 Initial Measurement

[Read section](https://asc.understandingaccounting.org/asc/340/948/#30-initial-measurement)

SEC content: no

#### Costs of Issuing Certain GNMA Securities

##### [340-948-30-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-30-1)

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The aggregate amount capitalized, including amounts capitalized under other provisions of this Subtopic, shall not exceed the present value of net future servicing income. The rate used to determine the present value shall be an appropriate long-term interest rate. For this purpose, estimates of future servicing revenue shall include expected late charges and other ancillary revenue. Estimates of expected future servicing costs shall include direct costs associated with performing the servicing function and appropriate allocations of other costs. Estimated future servicing costs may be determined on an incremental cost basis.

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## ASC 340-948-35: 35 Subsequent Measurement

[Read section](https://asc.understandingaccounting.org/asc/340/948/#35-subsequent-measurement)

SEC content: no

#### Costs of Issuing Certain GNMA Securities

##### [340-948-35-1](https://asc.understandingaccounting.org/asc/340/948/#340-948-35-1)

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The amount capitalized shall be amortized in proportion to, and over the period of, estimated net servicing income—the excess of servicing revenues over servicing costs.