# ASC 810-942: Consolidation — Financial Services—Depository and Lending Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/810/942/) 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): 2026-09-10T01:31:33.467Z to 2026-09-10T01:32:02.692Z Record version: sha256:d3e28d5d700c6a4e9e39397a4616e41ceb24da1ead83f9d4019472ee38688de2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942: Consolidation — Financial Services—Depository and Lending ### Machine-generated study aids ```json { "summary": "This Subtopic tells bank holding companies how to present trust-preferred securities structures. Because the sponsoring bank holds no variable interest in the special-purpose trust, it cannot be the trust's primary beneficiary and does not consolidate it (810-942-55-2). Instead, the bank reports the subordinated debentures it issued to the trust as debt on its balance sheet, and accounts for its holding of the trust's common securities under the equity method (810-942-45-1).", "key_points": [ "The Subtopic provides presentation and disclosure guidance concerning trust-preferred securities (810-942-05-1) and follows the scope in Section 942-10-15 (810-942-15-1).", "In the typical trust-preferred arrangement the bank holds no variable interest in the trust and therefore cannot be the trust's primary beneficiary (810-942-45-1).", "A sponsoring bank or holding company shall not consolidate the trust because the trust is a VIE of which the sponsor is not the primary beneficiary (810-942-55-2).", "If the trust is not consolidated, the bank or holding company reports its debt issued to the trust and an equity-method investment in the common stock of the trust (810-942-45-1).", "In the typical structure the trust issues common securities (all held by the holding company) and trust-preferred securities (sold to investors), and its only assets are deeply subordinated debentures of the corporate issuer (810-942-55-1).", "Interest paid by the holding company on the subordinated debentures funds the trust's dividends on the trust-preferred securities; the debentures have a stated maturity, may include an embedded call option, and the trust-preferred securities are usually subject to mandatory redemption upon repayment of the debentures (810-942-55-1).", "Paragraph 810-942-45-2 was superseded by ASU No. 2013-07." ], "categories": [ "Consolidation", "Presentation", "Debt and equity", "Industry-specific" ], "audience_level": "intermediate", "student_note": "This is the classic exam illustration of a VIE that is *not* consolidated by its sponsor: the holding company's own debt is the trust's only asset, so the sponsor absorbs no variability from the trust. The common misunderstanding is assuming that sponsorship plus ownership of 100% of the trust's common securities forces consolidation — it does not; the debentures stay on the balance sheet as debt and the common securities are carried under the equity method.", "related_topics": [ "810-10", "942-10", "323-10", "470-10", "825-10" ], "key_concepts": [ "trust-preferred securities", "variable interest entity", "primary beneficiary", "special-purpose entity", "subordinated debentures", "equity method investment", "regulatory capital", "bank holding company" ] } ``` Source downloaded (UTC): 2026-09-10T01:31:33.467Z to 2026-09-10T01:31:33.467Z Record version: sha256:f6f1e9af15eeb15845a64daf7c5db7fe3b4258fcfaad134ec87ee6f411719aef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/810/942/#00-status) SEC content: no ##### [810-942-00-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:33.467Z to 2026-09-10T01:31:33.467Z Record version: sha256:8a737f82322af14521f287f75697482dcfbaf18e0f19c38b1d69c3691e96f164 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
Liquidating BankSupersededAccounting Standards Update No. 2013-0704/22/2013
942-810-05-1AmendedAccounting Standards Update No. 2013-0704/22/2013
942-810-45-2SupersededAccounting Standards Update No. 2013-0704/22/2013
Source downloaded (UTC): 2026-09-10T01:31:37.026Z to 2026-09-10T01:31:37.026Z Record version: sha256:9464817baa1d5abc4d6527bd5bfdeda77b31dda4c3b9d28219646fceb974c305 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/810/942/#05-overview-and-background) SEC content: no ##### [810-942-05-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:37.026Z to 2026-09-10T01:31:37.026Z Record version: sha256:1229c1252bc3dfaf023008560a05feabd7036313fc71c134294cdc24346215b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides presentation and disclosure guidance concerning trust-preferred securities. Source downloaded (UTC): 2026-09-10T01:31:39.272Z to 2026-09-10T01:31:39.272Z Record version: sha256:54c3134bbc0a66651866dc6e0ad4d03b2d51ecbd9798f9d2341157972697aed5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/810/942/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [810-942-15-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:39.272Z to 2026-09-10T01:31:39.272Z Record version: sha256:ea3b60457c1644405978d24b4a61e748746f70ffefaa4e8aecb8e79d9a63b87b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 942-10-15. Source downloaded (UTC): 2026-09-10T01:31:42.993Z to 2026-09-10T01:31:42.993Z Record version: sha256:bf80daccfc71ebb0d1c9b1bcb06f8014d57392beb32471eb856fa5712af96202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-20: 20 Glossary [Read section](https://asc.understandingaccounting.org/asc/810/942/#20-glossary) SEC content: no Source downloaded (UTC): 2026-09-10T01:31:45.670Z to 2026-09-10T01:31:45.670Z Record version: sha256:0c57297e793739fb87c46269f8b0049987105cddf68ff6d517caf0b1d363a27b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/810/942/#45-other-presentation-matters) SEC content: no #### Trust-Preferred Arrangements ##### [810-942-45-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:45.670Z to 2026-09-10T01:31:45.670Z Record version: sha256:9a86d6a1114c7c1f95677d787b0e02c4c48df5a33244e077f261cd686a3d4cd2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the typical trust-preferred arrangement, the bank holds no variable interest in the trust, and therefore, cannot be the trust's primary beneficiary. If the bank does not consolidate the trust, the bank or holding company shall report its debt issued to the trust and an equity-method investment in the common stock of the trust. ##### [810-942-45-2](https://asc.understandingaccounting.org/asc/810/942/#810-942-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:45.670Z to 2026-09-10T01:31:45.670Z Record version: sha256:9aa64a1e4e7aff9212d055230bc579df974b981fed9796691a85c40e1fa3fbda Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2013-07](https://asc.understandingaccounting.org/updates/asu-2013-07/). Source downloaded (UTC): 2026-09-10T01:31:49.616Z to 2026-09-10T01:31:49.616Z Record version: sha256:afccd2313a2e82947c1b8d228dc1299fb1223fb078e2e54924b45b7343d389a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/810/942/#55-implementation-guidance-and-illustrations) SEC content: no #### Trust-Preferred Securities ##### [810-942-55-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:49.616Z to 2026-09-10T01:31:49.616Z Record version: sha256:f2e2f766e58e2fa8afad4ba02e8d665c932bfbe7b126e72d4e808c344bfad6dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:49.616Z to 2026-09-10T01:31:49.616Z Record version: sha256:a864100bba4a99284250d87f96d121d4fbab424501b9b049a42fcc83ce4090c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. Source downloaded (UTC): 2026-09-10T01:31:53.351Z to 2026-09-10T01:31:53.351Z Record version: sha256:2146e89e35a1f342ff9bda30da8597b4899773d04bd2f269cb9f5ac5dd582bb7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/810/942/#sec-00-status) SEC content: yes ##### [810-942-S00-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:53.351Z to 2026-09-10T01:31:53.351Z Record version: sha256:9d1aec2e8d8e7a5f8dcec5571d7db1b5395b37bd13efd9c97bbff834414f2a3d 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
942-810-S99-1AmendedAccounting Standards Update No. 2012-0308/27/2012
Source downloaded (UTC): 2026-09-10T01:31:57.425Z to 2026-09-10T01:31:57.425Z Record version: sha256:aba0e7b3d3b2486a8e2e8078a1b5a51474ed11279303c0db9b1d8f286f7b6a86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/810/942/#sec-25-recognition) SEC content: yes #### Consolidation of a Subsidiary When a Decision Requiring Divestiture Has Been Made or Is Likely to Be Necessary ##### [810-942-S25-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-S25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:31:57.425Z to 2026-09-10T01:31:57.425Z Record version: sha256:4a1e7a1e0bc373c9e2712a0ea9859c35df7c015eeba01a827c4872ba4a1359ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [810-10-S99-2](https://asc.understandingaccounting.org/asc/810/10/#810-10-S99-2), Regulation S-X Rule 3A-02(c), for rules pertaining to consolidation of a subsidiary of a registrant subject to the Bank Holding Company Act of 1956 when a decision requiring divestiture has been made or is likely to be necessary. Source downloaded (UTC): 2026-09-10T01:32:00.190Z to 2026-09-10T01:32:00.190Z Record version: sha256:2f6d6006fca53b4fc9a885630c1002e1f7f58e664843e0764632f0f171b47ea6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-S40: SEC 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/810/942/#sec-40-derecognition) SEC content: yes #### Certain Transfers of Nonperforming Assets ##### [810-942-S40-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-S40-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:32:00.190Z to 2026-09-10T01:32:00.190Z Record version: sha256:3de407d02547d496399578d038828d6d0a9cea3dc2fa15a7f56a2d82f8ac4f93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [942-810-S99-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-S99-1), SAB Topic 5.V, for SEC Staff views on accounting for certain transfers of nonperforming assets. Source downloaded (UTC): 2026-09-10T01:32:02.692Z to 2026-09-10T01:32:02.692Z Record version: sha256:fee47453829ce087571b7e5deb10afd11e3ea9b35d7d09318f50ae579f61c1fa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-942-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/810/942/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [810-942-S99-1](https://asc.understandingaccounting.org/asc/810/942/#810-942-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:32:02.692Z to 2026-09-10T01:32:02.692Z Record version: sha256:01155c0cd5693d550c0f6eaf4dd007fde780665f6234e0ac59b3adbc19a20613 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.V, Certain Transfer of Non-performing Assets. - Facts: A financial institution desires to reduce its nonaccrual or reduced rate loans and other nonearning assets, including foreclosed real estate (collectively, "nonperforming assets"). Some or all of such nonperforming assets are transferred to a newly-formed entity (the "new entity"). The financial institution, as consideration for transferring the nonperforming assets, may receive (a) the cash proceeds of debt issued by the new entity to third parties, (b) a note or other redeemable instrument issued by the new entity, or (c) a combination of (a) and (b). The residual equity interests in the new entity, which carry voting rights, initially owned by the financial institution, are transferred to outsiders (for example, via distribution to the financial institution's shareholders or sale or contribution to an unrelated third party). - The financial institution typically will manage the assets for a fee, providing necessary services to liquidate the assets, but otherwise does not have the right to appoint directors or legally control the operations of the new entity. - FASB ASC Topic 860, Transfers and Servicing, provides guidance for determining when a transfer of financial assets can be recognized as a sale. The interpretive guidance provided in response to Questions 1 and 2 of this SAB does not apply to transfers of financial assets falling within the scope of FASB ASC Topic 860. Because FASB ASC Topic 860 does not apply to distributions of financial assets to shareholders or a contribution of such assets to unrelated third parties, the interpretive guidance provided in response to Questions 1 and 2 of this SAB would apply to such conveyances. - Further, registrants should consider the guidance contained in FASB ASC Topic 810, Consolidation, in determining whether it should consolidate the newly-formed entity. - Question 1: What factors should be considered in determining whether such transfer of nonperforming assets can be accounted for as a disposition by the financial institution? - Interpretive Response: The staff believes that determining whether nonperforming assets have been disposed of in substance requires an assessment as to whether the risks and rewards of ownership have been transferred. FN38 The staff believes that the transfer described should not be accounted for as a sale or disposition if (a) the transfer of nonperforming assets to the new entity provides for recourse by the new entity to the transferor financial institution, (b) the financial institution directly or indirectly guarantees debt of the new entity in whole or in part, (c) the financial institution retains a participation in the rewards of ownership of the transferred assets, for example through a higher than normal incentive or other management fee arrangement, FN39 or (d) the fair value of any material non-cash consideration received by the financial institution (for example, a note or other redeemable instrument) cannot be reasonably estimated. Additionally, the staff believes that the accounting for the transfer as a sale or disposition generally is not appropriate where the financial institution retains rewards of ownership through the holding of significant residual equity interests or where third party holders of such interests do not have a significant amount of capital at risk. - FN38 \[Original footnote removed by SAB 114.\] - FN39 The staff recognizes that the determination of whether the financial institution retains a participation in the rewards of ownership will require an analysis of the facts and circumstances of each individual transaction. Generally, the staff believes that, in order to conclude that the financial institution has disposed of the assets in substance, the management fee arrangement should not enable the financial institution to participate to any significant extent in the potential increases in cash flows or value of the assets, and the terms of the arrangement, including provisions for discontinuance of services, must be substantially similar to management arrangements with third parties. - Where accounting for the transfer as a sale or disposition is not appropriate, the nonperforming assets should remain on the financial institution's balance sheet and should continue to be disclosed as nonaccrual, past due, restructured or foreclosed, as appropriate, and the debt of the new entity should be recorded by the financial institution. - Question 2: If the transaction is accounted for as a sale to an unconsolidated party, at what value should the transfer be recorded by the financial institution? - Interpretive Response: The staff believes that the transfer should be recorded by the financial institution at the fair value of assets transferred (or, if more clearly evident, the fair value of assets received) and a loss recognized by the financial institution for any excess of the net carrying value FN40 over the fair value. FN41 Fair value is the amount that would be realizable in an outright sale to an unrelated third party for cash. FN42 The same concepts should be applied in determining fair value of the transferred assets, i.e., if an active market exists for the assets transferred, then fair value is equal to the market value. If no active market exists, but one exists for similar assets, the selling prices in that market may be helpful in estimating the fair value. If no such market price is available, a forecast of expected cash flows, discounted at a rate commensurate with the risks involved, may be used to aid in estimating the fair value. In situations where discounted cash flows are used to estimate fair value of nonperforming assets, the staff would expect that the interest rate used in such computations will be substantially higher than the cost of funds of the financial institution and appropriately reflect the risk of holding these nonperforming assets. Therefore, the fair value determined in such a way will be lower than the amount at which the assets would have been carried by the financial institution had the transfer not occurred, unless the financial institution had been required under GAAP to carry such assets at market value or the lower of cost or market value. - FN40 The carrying value should be reduced by any allocable allowance for credit losses or other valuation allowances. The staff believes that the loss recognized for the excess of the net carrying value over the fair value should be considered a credit loss and this should not be included by the financial institution as loss on disposition. - FN41 The staff notes that FASB ASC paragraph [942-810-45-2](https://asc.understandingaccounting.org/asc/810/942/#810-942-45-2) (Financial Services—Depository and Lending Topic) provides guidance that the newly created "liquidating bank" should continue to report its assets and liabilities at fair values at the date of the financial statements. - FN42 FASB ASC paragraph [845-10-30-14](https://asc.understandingaccounting.org/asc/845/10/#845-10-30-14) (Nonmonetary Transactions Topic) provides guidance that an enterprise that distributes loans to its owners should report such distribution at fair value. - Question 3: Where the transaction may appropriately be accounted for as a sale to an unconsolidated party and the financial institution receives a note receivable or other redeemable instrument from the new entity, how should such asset be disclosed pursuant to Item III C, "Risk Elements," of Industry Guide 3? What factors should be considered related to the subsequent accounting for such instruments received? - Interpretive Response: The staff believes that the financial institution may exclude the note receivable or other asset from its Risk Elements disclosures under Guide 3 provided that: (a) the receivable itself does not constitute a nonaccrual, past due, restructured, or potential problem loan that would require disclosure under Guide 3, and (b) the underlying collateral is described in sufficient detail to enable investors to understand the nature of the note receivable or other asset, if material, including the extent of any over-collateralization. The description of the collateral normally would include material information similar to that which would be provided if such assets were owned by the financial institution, including pertinent Risk Element disclosures. - The staff notes that, in situations in which the transaction is accounted for as a sale to an unconsolidated party and a portion of the consideration received by the registrant is debt or another redeemable instrument, careful consideration must be given to the appropriateness of recording profits on the management fee arrangement, or interest or dividends on the instrument received, including consideration of whether it is necessary to defer such amounts or to treat such payments on a cost recovery basis. Further, if the new entity incurs losses to the point that its permanent equity based on GAAP is eliminated, it would ordinarily be necessary for the financial institution, at a minimum, to record further operating losses as its best estimate of the loss in realizable value of its investment. FN43 - FN43 Typically, the financial institution's claim on the new entity is subordinate to other debt instruments and thus the financial institution will incur any losses beyond those incurred by the permanent equity holders.