# ASC 810-942-55: Consolidation — Financial Services—Depository and Lending — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/810/942/#55-implementation-guidance-and-illustrations)

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## ASC 810-942-55: 55 Implementation Guidance and Illustrations

[Read section](https://asc.understandingaccounting.org/asc/810/942/#55-implementation-guidance-and-illustrations)

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#### Trust-Preferred Securities

##### [810-942-55-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-55-1)

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Trust-preferred securities have been issued by banks for a number of years due to favorable regulatory capital treatment. Various trust-preferred structures have been developed involving minor differences in terms. Under the typical structure, a bank holding company first organizes a business trust or other special-purpose entity. This trust issues two classes of securities: common securities, all of which are purchased and held by the bank holding company, and trust-preferred securities, which are sold to investors. The trust's only assets are deeply subordinated debentures of the corporate issuer, which the trust purchases with the proceeds from the sale of its common and preferred securities. The bank holding company makes periodic interest payments on the subordinated debentures to the business trust, which uses these payments to pay periodic dividends on the trust-preferred securities to the investors. The subordinated debentures have a stated maturity and may include an embedded call option. Most trust-preferred securities are subject to a mandatory redemption upon the repayment of the debentures.

##### [810-942-55-2](https://asc.understandingaccounting.org/asc/810/942/#810-942-55-2)

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Under the provisions of Topic 810, a bank or holding company that sponsored a structure described in the preceding paragraph shall not consolidate the trust because the trust is a variable interest entity (VIE) and the bank or holding company is not the primary beneficiary of that VIE.