ASC

ASC 470-942

Financial Services—Depository and Lending

470 Debt

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In brief

IntermediatePresentationDisclosureIndustry-specificFair value

This Subtopic gives industry-specific presentation and disclosure rules for the borrowings and long-term obligations of depository and lending institutions. Significant categories of borrowings must appear as separate balance sheet line items (or one line with note detail of components), mortgage transfers treated as secured borrowings under Topic 860 must be shown as debt separately from advances, other notes payable and subordinated debt, and notes must describe the principal terms of each debt agreement. Fair value estimates of deposit liabilities must exclude core deposit intangibles.

Key points (5)
  • Significant categories of borrowings shall be presented as separate line items in the liability section of the balance sheet, or as a single line item with note disclosure of the components; alternatively, debt may be presented by priority (senior or subordinated) if significant categories of borrowings are separately disclosed (470-942-45-1).
  • Transfers of mortgages accounted for as secured borrowings under Topic 860 are classified as debt of the issuing institution, and such mortgage-backed bonds must be classified separately from advances, other notes payable, and subordinated debt (470-942-45-2).
  • In estimating the fair value of deposit liabilities, the value of long-term depositor relationships (core deposit intangibles) shall not be considered, because those are separate intangible assets rather than financial instruments (470-942-50-1).
  • Accounting and reporting for long-term obligations is the same for financial institutions as for other entities; an unclassified balance sheet need not split current versus long-term portions, and Topic 440 requires disclosure of future payments on long-term borrowings (470-942-50-2).
  • Notes must describe the principal terms of debt agreements, including title/nature, interest rate (fixed or floating), payment terms and maturity dates, collateral, conversion or redemption features, senior or subordinated status, and restrictive covenants such as dividend restrictions (470-942-50-3).

For students. Exam traps here are the two industry twists: mortgage transfers failing sale treatment under Topic 860 become debt shown separately from advances and subordinated debt, and core deposit intangibles are never folded into the fair value of deposit liabilities. Students often assume banks get relief from normal long-term debt reporting — they do not, except that an unclassified balance sheet avoids a current/noncurrent split.

significant categories of borrowingssenior and subordinated debtsecured borrowingmortgage-backed bondscore deposit intangiblesfair value of deposit liabilitiesunclassified balance sheetrestrictive covenants

Machine-generated study aid for ASC 470-942. Check the source paragraphs below.

470-942-00Status

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470-942-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
942-470-50-1AmendedAccounting Standards Update No. 2016-0101/05/2016

470-942-05Overview and Background

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470-942-05-1
This Subtopic provides disclosure and presentation guidance concerning certain borrowings and long-term obligations of financial institutions.

470-942-15Scope and Scope Exceptions

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Overall Guidance

470-942-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 942-10-15.

470-942-45Other Presentation Matters

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Borrowings

470-942-45-1
Significant categories of borrowings shall be presented as separate line items in the liability section of the balance sheet, or as a single line item with appropriate note disclosure of components. Institutions may, alternatively, present debt based on the debt's priority (that is, senior or subordinated) if they also provide separate disclosure of significant categories of borrowings.

Secured Borrowings

470-942-45-2
Transfers of mortgages accounted for under Topic 860 as secured borrowings of the issuing institution shall be classified as debt on the institution's balance sheet. Such mortgage-backed bonds shall be classified separately from advances, other notes payable, and subordinated debt.

470-942-50Disclosure

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Fair Value of Deposit Liabilities

470-942-50-1
In estimating the fair value of deposit liabilities, a financial entity shall not take into account the value of its long-term relationships with depositors, commonly known as core deposit intangibles, which are separate intangible assets, not financial instruments.

Long-Term Obligations

470-942-50-2
Accounting and reporting requirements for long-term obligations are the same for financial institutions as for other entities. If the financial institution has an unclassified balance sheet, there is no need to separate balances into current and long-term portions. Topic 440 requires disclosure of future payments on long-term borrowings.

Debt

470-942-50-3
For debt, the notes to the financial statements shall describe the principal terms of the respective agreements including but not limited to all of the following:
  1. a
    The title or nature of the agreement, or both
  2. b
    The interest rate (and whether it is fixed or floating)
  3. c
    The payment terms and maturity date(s)
  4. d
    Collateral
  5. e
    Conversion or redemption features
  6. f
    Whether it is senior or subordinated
  7. g
    Restrictive covenants (such as dividend restrictions), if any.

470-942-S45Other Presentation MattersSEC

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Short-Term Borrowings

470-942-S45-1
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.13, for presentation requirements for short-term borrowings.

Bank Acceptances Outstanding

470-942-S45-2
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.14, for presentation requirements for bank acceptances outstanding.

Other Liabilities

470-942-S45-3
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.15, for presentation requirements for other liabilities.

Long-Term Debt

470-942-S45-4
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.16, for presentation requirements for long-term debt.

470-942-S50DisclosureSEC

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Short-Term Borrowing

470-942-S50-1
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.13, for presentation requirements for short-term borrowings.

Bank Acceptances Outstanding

470-942-S50-2
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.14, for presentation requirements for bank acceptances outstanding.

Other Liabilities

470-942-S50-3
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.15, for presentation requirements for other liabilities.

Long-Term Debt

470-942-S50-4
See paragraph 942-210-S99-1, Regulation S-X Rule 9-03.16, for disclosure requirements for long-term debt.

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