# ASC 860-10-40: Transfers and Servicing — Overall — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/860/10/#40-derecognition) 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): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:b423dbec59fe6e952298230ee25365e16936f3a2eccc56a67dd3886838a6dd16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 860-10-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/860/10/#40-derecognition) SEC content: no ##### [860-10-40-1](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:d1ef2fdfd46d009213a88138d3a804356e3854e659c93a962afaef08159fd2a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section sets forth the conditions for derecognition of a [transferred financial asset](https://asc.understandingaccounting.org/glossary/t/#transferred-financial-assets "Transfers of any of the following: An entire financial asset A group of entire financial assets A participating interest in an entire financial asset.") and is organized as follows: 1. a [Subparagraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). 2. b Conditions for a sale 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.") 3. c Application of the sale criteria to instruments that have the potential to be assets or liabilities 4. d Circumstances that result in a [transferor](https://asc.understandingaccounting.org/glossary/t/#transferor "An entity that transfers a financial asset, an interest in a financial asset, or a group of financial assets that it controls to another entity.") regaining control of assets previously sold 5. e [Subparagraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-2](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:7494fe3bc9709b1676e5b6b99a3232fa42c3aa6d3bb2ee853bab4ca2ac6db9fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-10-40-3](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:763bb828c12dd45ca9a0c47d842f2aedd8925fc3a2a1670b25af3a0094898d03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). #### Conditions for a Sale of Financial Assets ##### [860-10-40-4](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:d18eb62f6bbcad4d1755ee26d12db15ad7b4389d5675a4fdda79c7fee3a9bdf2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The objective of paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) and related implementation guidance is to determine whether a transferor and its [consolidated affiliates](https://asc.understandingaccounting.org/glossary/c/#consolidated-affiliate "An entity whose assets and liabilities are included in the consolidated, combined, or other financial statements being presented.") included in the financial statements being presented have surrendered control over [transferred financial assets](https://asc.understandingaccounting.org/glossary/t/#transferred-financial-assets "Transfers of any of the following: An entire financial asset A group of entire financial assets A participating interest in an entire financial asset.") or third-party [beneficial interests](https://asc.understandingaccounting.org/glossary/b/#beneficial-interests "Rights to receive all or portions of specified cash inflows received by a trust or other entity, including, but not limited to, all of the following: Senior and subordinated shares of interest, principal, or other cash inflows to be passed-through or paid-through Premiums due to guarantors Commercial paper obligations Residual interests, whether in the form of debt or equity."). This determination: 1. a Shall first consider whether the [transferee](https://asc.understandingaccounting.org/glossary/t/#transferee "An entity that receives a financial asset, an interest in a financial asset, or a group of financial assets from a transferor.") would be consolidated by the transferor (for implementation guidance, see paragraph [860-10-55-17D](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-17D)) 2. b Shall consider the transferor's continuing involvement in the transferred financial assets 3. c Requires the use of judgment that shall consider all arrangements or agreements made contemporaneously with, or in contemplation of, the [transfer](https://asc.understandingaccounting.org/glossary/t/#transfer "The conveyance of a noncash financial asset by and to someone other than the issuer of that financial asset. A transfer includes the following: Selling a receivable Putting a receivable into a securitization trust Posting a receivable as collateral. A transfer excludes the following: The origination of a receivable Settlement of a receivable The restructuring of a receivable into a security in a troubled debt restructuring."), even if they were not entered into at the time of the transfer. With respect to item (b), all continuing involvement by the transferor, its consolidated affiliates included in the financial statements being presented, or its [agents](https://asc.understandingaccounting.org/glossary/a/#agent "A party that acts for and on behalf of another party. For example, a third-party intermediary is an agent of the transferor if it acts on behalf of the transferor.") shall be considered continuing involvement by the transferor. In a transfer between two subsidiaries of a common parent, the transferor-subsidiary shall not consider parent involvements with the transferred financial assets in applying paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5). ##### [860-10-40-4A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:9d076e2ff458d8442bbca4968dcb375dc4c54058c5d31d6e42ba280c1c5bc749 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-4B](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4B) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:d2b0d4f5375055103952ce5c99eb0cf51b495293482f31eba2ecb8adff1b31e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-4C](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4C) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:ab5f4975c4cde79dda89004e8ceba23621812085be27c7b001efbbbc40a639a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Items (b) through (c) in paragraph [860-10-40-4](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4) do not apply to a transfer 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 a related [repurchase financing](https://asc.understandingaccounting.org/glossary/r/#repurchase-financing "A repurchase agreement that relates to a previously transferred financial asset between the same counterparties (or consolidated affiliates of either counterparty) that is entered into contemporaneously with, or in contemplation of, the initial transfer."). In transactions involving a contemporaneous transfer of a financial asset and a repurchase financing of that transferred financial asset with the same counterparty, a transferor and transferee shall separately account for the initial transfer of the financial asset and the related repurchase agreement. Paragraphs [860-10-55-17A through 55-17C](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-17A) provide implementation guidance related to repurchase financings. ##### [860-10-40-4D](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4D) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:7a62074e98090f24f9c77197f32829e9fb6fe3b46a60e43fe3b88c11f47c7907 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To be eligible for sale accounting, an entire financial asset cannot be divided into components before a transfer unless all of the components meet the definition of a [participating interest](https://asc.understandingaccounting.org/glossary/p/#participating-interest "Paragraph 860-10-40-6A defines the term participating interest."). The legal form of the asset and what the asset conveys to its holders shall be considered in determining what constitutes an entire financial asset (for implementation guidance, see paragraph [860-10-55-17E](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-17E)). An entity shall not account for a transfer of an entire financial asset or a participating interest in an entire financial asset partially as a sale and partially as a secured borrowing. ##### [860-10-40-4E](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4E) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:c8ee51ce43e2444122c699d0663ac1d4cd4d8fb40280365b100d418eba0e1f56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a transfer of a portion of an entire financial asset meets the definition of a participating interest, the transferor shall apply the guidance in the following paragraph. If a transfer of a portion of a financial asset does not meet the definition of a participating interest, the transferor and transferee shall account for the transfer in accordance with the guidance in paragraph [860-30-25-2](https://asc.understandingaccounting.org/asc/860/30/#860-30-25-2). However, if the transferor transfers an entire financial asset in portions that do not individually meet the participating interest definition, the following paragraph shall be applied to the entire financial asset once all portions have been transferred. ##### [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:fc3bdd68f431e3133b0814d36c411fd6a2c2fee9c5adb3e0a2f3bfd8163ea6ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset in which the transferor surrenders control over those financial assets shall be accounted for as a sale if and only if all of the following conditions are met: 1. a Isolation of transferred financial assets. The transferred financial assets have been isolated from the transferor—put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership. Transferred financial assets are isolated in bankruptcy or other receivership only if the transferred financial assets would be beyond the reach of the powers of a bankruptcy trustee or other receiver for the transferor or any of its consolidated affiliates included in the financial statements being presented. For multiple step transfers, a [bankruptcy-remote entity](https://asc.understandingaccounting.org/glossary/b/#bankruptcy-remote-entity "An entity that is designed to make remote the possibility that it would enter bankruptcy or other receivership.") is not considered a consolidated affiliate for purposes of performing the isolation analysis. Notwithstanding the isolation analysis, each entity involved in the transfer is subject to the applicable guidance on whether it shall be consolidated (see paragraphs [860-10-40-7 through 40-14](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-7) and the guidance beginning in paragraph [860-10-55-18](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18)). A [set-off right](https://asc.understandingaccounting.org/glossary/s/#set-off-right "A common law right of a party that is both a debtor and a creditor to the same counterparty to reduce its obligation to that counterparty if that counterparty fails to pay its obligation.") is not an impediment to meeting the isolation condition. 2. b Transferee's rights to pledge or exchange. This condition is met if both of the following conditions are met: 1. 1 Each transferee (or, if the transferee is an entity whose sole purpose is to engage in [securitization](https://asc.understandingaccounting.org/glossary/s/#securitization "The process by which financial assets are transformed into securities.") or asset-backed financing activities and that entity is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received. 2. 2 No condition does both of the following: 1. i Constrains the transferee (or third-party holder of its beneficial interests) from taking advantage of its right to pledge or exchange 2. ii Provides more than a trivial benefit to the transferor (see paragraphs [860-10-40-15 through 40-21](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-15) ). If the transferor, its consolidated affiliates included in the financial statements being presented, and its agents have no continuing involvement with the transferred financial assets, the condition under paragraph [860-10-40-5(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) is met. 3. c Effective control. The transferor, its consolidated affiliates included in the financial statements being presented, or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets (see paragraph [860-10-40-22A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-22A)). A transferor's effective control over the transferred financial assets includes, but is not limited to, any of the following: 1. 1 An agreement that both entitles and obligates the transferor to repurchase or redeem the transferred financial assets before their maturity (see paragraphs [860-10-40-23 through 40-25](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-23) ) 2. 2 An agreement, other than through a [cleanup call](https://asc.understandingaccounting.org/glossary/c/#cleanup-call-option "An option held by the servicer or its affiliate, which may be the transferor, to purchase the remaining transferred financial assets, or the remaining beneficial interests not held by the transferor, its affiliates, or its agents in an entity (or in a series of beneficial interests in transferred financial assets within an entity) if the amount of outstanding financial assets or beneficial interests falls to a level at which the cost of servicing those assets or beneficial interests becomes burdensome in relation to the benefits of servicing.") (see paragraphs [860-10-40-28 through 40-39](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-28) ), that provides the transferor with both of the following: 1. i The [unilateral ability](https://asc.understandingaccounting.org/glossary/u/#unilateral-ability "A capacity for action not dependent on the actions (or failure to act) of any other party.") to cause the holder to return specific financial assets 2. ii A more-than-trivial benefit attributable to that ability. 3. 3 An agreement that permits the transferee to require the transferor to repurchase the transferred financial assets at a price that is so favorable to the transferee that it is probable that the transferee will require the transferor to repurchase them (see paragraph [860-10-55-42D](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-42D)). ##### [860-10-40-5A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:4079c5ebf6bd84709ee611cbee241996ec9549b8987a4e1f54174a04291debf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [repurchase-to-maturity transaction](https://asc.understandingaccounting.org/glossary/r/#repurchase-to-maturity-transaction "A repurchase agreement in which the settlement date of the agreement to repurchase a transferred financial asset is at the maturity date of that financial asset and the agreement would not require the transferor to reacquire the financial asset.") shall be accounted for as a secured borrowing as if the transferor maintains effective control (see paragraphs [860-10-40-24 through 40-24A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-24)). ##### [860-10-40-6](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:13298649afdc125e5936b1d4b2b91b0d5e63783f1bd44bb1a4c4107373e7e5cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on accounting for a transfer that satisfies the conditions in paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5), see Subtopic 860-20, including Section 860-20-40's derecognition guidance and Section 860-20-25's guidance on recognition of new assets obtained and new liabilities. For guidance on accounting for a transfer that does not satisfy the conditions in paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5), see Subtopic 860-30. ##### [860-10-40-6A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-6A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:4c748408a629bd17283d2bd55c1a6e69d106da9b9bfe1bfa1f160693e5b194a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A participating interest has all of the following characteristics: 1. a From the date of the transfer, it represents a proportionate (pro rata) ownership interest in an entire financial asset. The percentage of ownership interests held by the transferor in the entire financial asset may vary over time, while the entire financial asset remains outstanding as long as the resulting portions held by the transferor (including any participating interest retained by the transferor, its consolidated affiliates included in the financial statements being presented, or its agents) and the transferee(s) meet the other characteristics of a participating interest. For example, if the transferor's interest in an entire financial asset changes because it subsequently sells another interest in the entire financial asset, the interest held initially and subsequently by the transferor must meet the definition of a participating interest. 2. b From the date of the transfer, all cash flows received from the entire financial asset are divided proportionately among the participating interest holders (including any interest retained by the transferor, its consolidated affiliates included in the financial statements being presented, or its agents) in an amount equal to their share of ownership. An allocation of specified cash flows is not an allowed characteristic of a participating interest unless each cash flow is proportionately allocated to the participating interest holders. In determining proportionate cash flows: 1. 1 Cash flows allocated as compensation for services performed, if any, shall not be included provided those cash flows meet both of the following conditions: 1. i They are not subordinate to the proportionate cash flows of the participating interest. 2. ii They are not significantly above an amount that would fairly compensate a substitute service provider, should one be required, which includes the profit that would be demanded in the marketplace. 2. 2 Any cash flows received by the transferor as proceeds of the transfer of the participating interest shall be excluded provided that the transfer does not result in the transferor receiving an ownership interest in the financial asset that permits it to receive disproportionate cash flows. 3. c The priority of cash flows has all of the following characteristics: 1. 1 The rights of each participating interest holder (including the transferor in its role as a participating interest holder) have the same priority. 2. 2 No participating interest holder's interest is subordinated to the interest of another participating interest holder. 3. 3 The priority does not change in the event of bankruptcy or other receivership of the transferor, the original debtor, or any other participating interest holder. 4. 4 Participating interest holders have no recourse to the transferor (or its consolidated affiliates included in the financial statements being presented or its agents) or to each other, other than any of the following: 1. i [Standard representations and warranties](https://asc.understandingaccounting.org/glossary/s/#standard-representations-and-warranties "Representations and warranties that assert the financial asset being transferred is what it is purported to be at the transfer date.") 2. ii Ongoing contractual obligations to service the entire financial asset and administer the transfer contract 3. iii Contractual obligations to share in any set-off benefits received by any participating interest holder. That is, no participating interest holder is entitled to receive cash before any other participating interest holder under its contractual rights as a participating interest holder. For example, if a participating interest holder also is the servicer of the entire financial asset and receives cash in its role as servicer, that arrangement would not violate this requirement. 4. d No party has the right to pledge or exchange the entire financial asset unless all participating interest holders agree to pledge or exchange the entire financial asset. A set-off right is not an impediment to meeting the participating interest definition. For implementation guidance on the application of the term _participating interest,_ see paragraphs [860-10-55-17I through 55-17N](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-17I) . ##### [860-10-40-7](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:c883de82fcfca30112ea93258cb6f9f3e76e0fe4681123ddb07a868a0f084f00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the following paragraphs and the related implementation guidance beginning in paragraph [860-10-55-18](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18) applies to transfers by all entities, including institutions for which the Federal Deposit Insurance Corporation (FDIC) would be the receiver. ##### [860-10-40-8](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:3424cc73c2d526fbb2751cb9e86eb72470f9ae59adaf20c9c2f02b20c825a53b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Derecognition of transferred financial assets is appropriate only if the available evidence provides reasonable assurance that the transferred financial assets would be beyond the reach of the powers of a bankruptcy trustee or other receiver for the transferor or any of its consolidated affiliates (that are not bankruptcy-remote entities) included in the financial statements being presented and its creditors (see paragraph [860-10-55-23(c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-23)). ##### [860-10-40-9](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:9e7d637e7227e2d2fbd17a74e8741fa212b18546b2bbb3dcf76900d7346071f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The nature and extent of supporting evidence required for an assertion in financial statements that transferred financial assets have been isolated—put presumptively beyond the reach of the transferor, any of its consolidated affiliates (that are not bankruptcy-remote entities) included in the financial statements being presented, and its creditors, either by a single transaction or a series of transactions taken as a whole—depend on the facts and circumstances. ##### [860-10-40-10](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:eb69d8be43b2eae688fa69ee23cdc0d2237dd67490b8fc20704148faa5b48edc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All available evidence that either supports or questions an assertion shall be considered, including whether the contract or circumstances permit the transferor to revoke the transfer. It also may include consideration of the legal consequences of the transfer in the jurisdiction in which bankruptcy or other receivership would take place, including all of the following: 1. a Whether a transfer of financial assets would likely be deemed a true sale at law (see paragraph [860-10-55-18A](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18A)) or otherwise isolated (see paragraph [860-10-55-18C](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18C)) 2. b Whether the transferor is [affiliated](https://asc.understandingaccounting.org/glossary/a/#affiliate "A party that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an entity. See Control.") with the transferee 3. c Other factors pertinent under applicable law. ##### [860-10-40-11](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:9243118ba75e183afa1d5aab76819ed279a43ecb6c43f8a0517e9e646181b63f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The requirement of paragraph [860-10-40-5(a)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) that transferred financial assets be isolated focuses on whether transferred financial assets would be isolated from the transferor in the event of bankruptcy or other receivership regardless of how remote or probable bankruptcy or other receivership is at the date of transfer. That is, the requirement would not be satisfied simply because the likelihood of bankruptcy of the transferor is determined to be remote. ##### [860-10-40-12](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:9aa3bec0a021b934a070c30586d8c47335603f3cf27cb115245eac4ac147d151 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A transferor's power to require the return of the transferred financial assets arising solely from a contract with the transferee, for example, a call option or removal-of-accounts provision, would not necessarily preclude a conclusion that transferred financial assets have been isolated from the transferor. However, such a power might preclude sale treatment if through it the transferor maintains effective control over the transferred financial assets. Some common financial transactions, for example, typical [repurchase agreements](https://asc.understandingaccounting.org/glossary/r/#repurchase-agreement "An agreement under which the transferor (repo party) transfers a financial asset to a transferee (repo counterparty or reverse party) in exchange for cash and concurrently agrees to reacquire that financial asset at a future date for an amount equal to the cash exchanged plus or minus a stipulated interest factor. Instead of cash, other securities or letters of credit sometimes are exchanged. Some repurchase agreements call for repurchase of financial assets that need not be identical to the financial assets transferred.") and securities lending transactions, may isolate transferred financial assets from the transferor, although they may not meet the other conditions for surrender of control (see paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5)). ##### [860-10-40-13](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:6d92f6fcaa2d7a2ef9e789e4bfc30c5cdc74190c1e7a50d46464c4e05f3511a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Whether securitizations isolate transferred financial assets may depend on such factors as whether the securitization is accomplished in one-step or multiple-step transfers. That is, the condition can be satisfied either by a single transaction or by a series of transactions considered as a whole. A securitization carried out in one transfer or a series of transfers may or may not isolate the transferred financial assets beyond the reach of the transferor, its consolidated affiliates (that are not bankruptcy-remote entities) included in the financial statements being presented, and its creditors. Whether it does depends on the structure of the securitization transaction taken as a whole, considering such factors as the type and extent of further involvement in arrangements to protect investors from credit, interest rate, and other risks, the availability of other financial assets, and the powers of bankruptcy courts or other receivers. ##### [860-10-40-14](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:326d3858553c49c9eb043584ad9c9cdd545bffe91972732459936c785f96de86 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [860-10-55-18 through 55-23](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18) clarify the requirements for transfers by entities subject to the U.S. Bankruptcy Code to meet the condition in paragraph [860-10-40-5(a)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) that the transferred financial assets have been put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy. Paragraphs [860-10-55-24 through 55-25](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-24) provide related guidance for entities not subject to the U.S. Bankruptcy Code. The discussion in paragraphs [860-10-55-18 through 55-25](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-18) relates only to the isolation condition in paragraph [860-10-40-5(a)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5). The conditions in paragraph [860-10-40-5(b) through (c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) also shall be considered to determine whether a transferor has surrendered control over the transferred financial assets. ##### [860-10-40-15](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:f185da830dbd6fe6cac5652b1a5612aa5e46b95e5e4cdcd3fdca7d17a647fb07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many transferor-imposed or other conditions on a transferee's right to pledge or exchange both constrain a transferee from pledging or exchanging and, through that constraint, provide more than a trivial benefit to the transferor. Judgment is required to assess whether a particular condition results in a constraint. Judgment also is required to assess whether a constraint provides a more-than-trivial benefit to the transferor. If the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing activities, that entity may be constrained from pledging or exchanging the transferred financial assets to protect the rights of beneficial interest holders in the financial assets of the entity. Paragraph [860-10-40-5(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) requires that the transferor look through the constrained entity to determine whether each third-party holder of its beneficial interests has the right to pledge or exchange the beneficial interests that it holds. The considerations in paragraphs [860-10-40-16 through 40-18](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-16) apply to the transferee or the third-party holders of its beneficial interests in an entity that is constrained from pledging or exchanging the assets it receives and whose sole purpose is to engage in securitization or asset-backed financing activities. ##### [860-10-40-16](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:67c128604b598c4c28af1a0b8a446d7b53ccff620ef1296a5cb467f79b0802b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A condition imposed by a transferor that constrains the transferee presumptively provides more than a trivial benefit to the transferor. A condition not imposed by the transferor that constrains the transferee may or may not provide more than a trivial benefit to the transferor. For example, if the transferor refrains from imposing its usual contractual constraint on a specific transfer because it knows an equivalent constraint is already imposed on the transferee by a third party, it presumptively benefits more than trivially from that constraint. However, the transferor cannot benefit from a constraint if it is unaware at the time of the transfer that the transferee is constrained. ##### [860-10-40-16A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-16A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:0f8bced03387511a708bb25af9f60a68278c6b730231f6aaadfe6a2d67c1324a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some circumstances in which the transferor has no continuing involvement with the transferred financial assets, some conditions may constrain a transferee from pledging or exchanging the financial assets. Paragraph [860-10-40-5(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) states that if the transferor, its consolidated affiliates included in the financial statements being presented, and its agents have no continuing involvement with the transferred financial assets, the condition under paragraph [860-10-40-5(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) is met. For example, if a transferor receives only cash in return for the transferred financial assets and the transferor, its consolidated affiliates included in the financial statements being presented, and its agents have no continuing involvement with the transferred financial assets, sale accounting is allowed under paragraph [860-10-40-5(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) even if the transferee entity is significantly limited in its ability to pledge or exchange the transferred assets. ##### [860-10-40-17](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:6d89323b221e03f0226a9b685ba1f23f58938b115f5bac0bf008ebe197fa83c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All of the following are examples of conditions that both constrain the transferee and presumptively provide the transferor with more than trivial benefits: 1. a A provision that prohibits selling or pledging a transferred loan receivable. This condition not only constrains the transferee but also provides the transferor with the more-than-trivial benefit of knowing who holds the financial asset (a prerequisite to repurchasing the financial asset) and of being able to block the financial asset from being transferred to a competitor for the loan customer's business. 2. b Transferor-imposed contractual constraints that narrowly limit timing or terms, for example, allowing a transferee to pledge only on the day assets are obtained or only on terms agreed to with the transferor. 3. c Some rights or obligations to reacquire transferred financial assets or beneficial interests, including all of the following: 1. 1 A [freestanding call option](https://asc.understandingaccounting.org/glossary/f/#freestanding-call-option "A call option that is neither embedded in nor attached to an asset subject to that call option.") written by a transferee to the transferor. Such an option may benefit the transferor and, if the transferred financial assets are not readily obtainable in the marketplace, is likely to constrain a transferee because the transferee might have to default if the call option was exercised and the transferee had pledged or exchanged the financial assets. 2. 1a A call option to repurchase third-party beneficial interests at the price paid plus a stated return if the third-party holders of its beneficial interests are constrained from pledging or exchanging their beneficial interests due to that call option. 3. 2 A call option written by a transferee to the transferor that is sufficiently deep-in-the-money, if the transferred financial assets are not readily obtainable in the marketplace, because the transferee would be more likely to have to hold the assets to comply with a potential exercise of the call option. 4. 3 A freestanding forward purchase-sale contract between the transferor and the transferee on transferred financial assets not readily obtainable in the marketplace would benefit the transferor and is likely to constrain a transferee. 5. 4 [Subparagraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-10-40-18](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:2786c17c9de320a7a190854f3d7d71a723e0b12a066c5da3f164894e0726ae76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All of the following are examples of conditions that presumptively would not constrain a transferee from pledging or exchanging the transferred financial asset: 1. a A transferor's right of first refusal on the occurrence of a bona fide offer to the transferee from a third party, because the right in itself does not enable the transferor to compel the transferee to sell the financial asset and the transferee would be in a position to receive the sum offered by exchanging the financial asset, albeit possibly from the transferor rather than the third party 2. b A requirement to obtain the transferor's permission to sell or pledge that is not to be unreasonably withheld 3. c A prohibition on sale to the transferor's competitor if other potential willing buyers exist 4. d A regulatory limitation such as on the number or nature of eligible transferees (as in the circumstance of securities issued under Securities Act Rule 144A or debt placed privately) 5. e Illiquidity, for example, the absence of an active market 6. f [Subparagraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). 7. g Freestanding rights to reacquire transferred assets that are readily obtainable. ##### [860-10-40-19](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:52d4faee98ab357ab36ec0a4ad6de6966a365a4fd3ba5aac5a037947d249a9b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Judgment is required to assess the significance of some conditions. For example, a prohibition on sale to the transferor's competitor would be a constraint if that competitor were the only potential willing buyer other than the transferor. ##### [860-10-40-20](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:0412b7bbe27f4e232441bb0b72406052d53ed312974cffe565fc7ef8ecdc3c80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-10-40-21](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:cb1e3330e687a48f8981c7f16b5e55989079bf1737b4c1712721e8d179d3ff9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As discussed in paragraphs [860-10-40-22 through 40-39](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-22) , some rights or obligations to reacquire transferred financial assets, regardless of whether they constrain the transferee, may result in the transferor's maintaining effective control over the transferred financial assets, thus precluding sale accounting under paragraph [860-10-40-5(c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5). For example, an [attached call option](https://asc.understandingaccounting.org/glossary/a/#attached-call-option "A call option held by the transferor of a financial asset that becomes part of and is traded with the underlying instrument. Rather than being an obligation of the transferee, an attached call option is traded with and diminishes the value of the underlying instrument transferred subject to that call option.") in itself would not constrain a transferee who is able, by exchanging or pledging the asset subject to that call, to obtain substantially all of its economic benefits. However, an attached call option could result in the transferor's maintaining effective control over the transferred asset(s) because the attached call option gives the transferor the unilateral ability to cause whoever holds that specific asset to return it. ##### [860-10-40-22](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:1ac8096367b45e36a9492b889dc452eac4b7f8492a2d87a118760e2e7e5fb624 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance discusses the condition in paragraph [860-10-40-5(c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) that the transferor, its consolidated affiliates included in the financial statements being presented, or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred financial assets. ##### [860-10-40-22A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-22A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:d39f474c63b8dffdc03b6a02579bcc80752d6a65daa2ba5bad3322bfae59c686 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [860-10-40-4](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-4) states that, to assess whether the transferor maintains effective control over the transferred financial assets, all continuing involvement by the transferor, its consolidated affiliates included in the financial statements being presented, or its agents shall be considered continuing involvement by the transferor. When assessing effective control, the transferor only considers the involvements of an agent when the agent acts for and on behalf of the transferor. If the transferor and transferee have the same agent, the agent's activities on behalf of the transferee shall not be considered in the transferor's evaluation of whether it has effective control over a transferred financial asset. For example, an investment manager may act as a fiduciary (agent) for both the transferor and the transferee; therefore, the transferor need only consider the involvements of the investment manager if it is acting on its behalf. ##### [860-10-40-23](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:204bca6408c9413d085b86d3fb2fc4c4ae34bb76bdda95a1be426054edd6c2d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) sets forth criteria that must be met to achieve sale accounting, this guidance addresses criteria that must be met for a transfer to fail the condition in paragraph [860-10-40-5(c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) through an agreement of the type described in paragraph [860-10-40-5(c)(1)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) and thus preclude sale accounting and result in accounting for the transfer as a secured borrowing. ##### [860-10-40-24](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:4e8fe1923eec7120891726606d11dc083383d3e8758581428d0aafb23ae3464b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An agreement that both entitles and obligates the transferor to repurchase or redeem transferred [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.") from the transferee maintains the transferor's effective control over those assets as described in paragraph [860-10-40-5(c)(1)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5), if all of the following conditions are met: 1. a The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred. To be substantially the same, the financial asset that was transferred and the financial asset that is to be repurchased or redeemed need to have all of the following characteristics: 1. 1 The same primary obligor (except for debt guaranteed by a sovereign government, central bank, government-sponsored enterprise or agency thereof, in which circumstance the guarantor and the terms of the guarantee must be the same) 2. 2 Identical form and type so as to provide the same risks and rights 3. 3 The same maturity (or in the circumstance of mortgage-backed pass-through and pay-through securities, similar remaining weighted-average maturities that result in approximately the same market yield) 4. 4 Identical contractual interest rates 5. 5 Similar assets as collateral 6. 6 The same aggregate unpaid principal amount or principal amounts within accepted good delivery standards for the type of security involved. Participants in the mortgage-backed securities market have established parameters for what is considered acceptable delivery. These specific standards are defined by the Securities Industry and Financial Markets Association and can be found in Uniform Practices for the Clearance and Settlement of Mortgage-Backed Securities and Other Related Securities, which is published by the Securities Industry and Financial Markets Association. See paragraph [860-10-55-35](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-35) for implementation guidance related to these conditions. 2. b [Subparagraph superseded by Accounting Standards Update No. 2011-03](https://asc.understandingaccounting.org/updates/asu-2011-03/). 3. c The agreement is to repurchase or redeem the financial assets before maturity, at a fixed or determinable price. 4. d The agreement is entered into contemporaneously with, or in contemplation of, the transfer. ##### [860-10-40-24A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-24A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:c40198ab3f079b7f4cd25cfcd9eac10a0fb03610b4522f0164e1cf1e97b81df7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding the characteristic in paragraph [860-10-40-24](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-24) that refers to a repurchase of the same (or substantially-the-same) financial asset, a [repurchase-to-maturity transaction](https://asc.understandingaccounting.org/glossary/r/#repurchase-to-maturity-transaction "A repurchase agreement in which the settlement date of the agreement to repurchase a transferred financial asset is at the maturity date of that financial asset and the agreement would not require the transferor to reacquire the financial asset.") shall be accounted for as a secured borrowing as if the transferor maintains effective control. ##### [860-10-40-25](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:c503a2bce90b18177c1b14dee7bcccb312ee683312489bca175972303be7872b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. With respect to the condition in (a) in paragraph [860-10-40-24](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-24) to maintain effective control under the condition in paragraph [860-10-40-5(c)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) as illustrated in paragraph [860-10-40-5(c)(1)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5), the transferor must have both the contractual right and the contractual obligation to repurchase or redeem [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 identical to those transferred or substantially the same as those concurrently transferred. Transfers that include only the right to reacquire, at the option of the transferor or upon certain conditions, or only the obligation to reacquire, at the option of the transferee or upon certain conditions, may not maintain the transferor's control, because the option might not be exercised or the conditions might not occur. Similarly, expectations of reacquiring the same securities without any contractual commitments (for example, as in wash sales) provide no control over the transferred securities. ##### [860-10-40-26](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:853a557c3111d560214882565b069f93345ccb5c6d0d3465a1907bf5ada1ee9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2011-03](https://asc.understandingaccounting.org/updates/asu-2011-03/). ##### [860-10-40-27](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:d3be04ce0722b96c4642762d98eab55b8ad5b0333603e1f1ab7057d2bc0de5ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2011-03](https://asc.understandingaccounting.org/updates/asu-2011-03/). ##### [860-10-40-28](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:b9e18baa06b9c3e24b71ce2d31478c32bb74f78db9d15e70ba3287692a3cfae2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses whether any of the following agreements maintain effective control under paragraph [860-10-40-5(c)(2)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5): 1. a A call option or other right conveys more than a trivial benefit (that is, fails the condition in paragraph [860-10-40-5(c)(2)(ii)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5)) if the price to be paid is fixed, determinable, or otherwise potentially advantageous, unless because that price is so far out of the money or for other reasons it is probable when the option is written that the transferor will not exercise it. 2. b A transferor's unilateral ability to cause a securitization entity to return to the transferor or otherwise dispose of specific transferred financial assets, for example, in response to its decision to exit a market or a particular activity, has the characteristic in paragraph [860-10-40-5(c)(2)(i)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) and, thus, would provide the transferor with effective control over the transferred financial assets if it also has the characteristic in paragraph [860-10-40-5(c)(2)(ii)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5)—that is, if it also provides more than a trivial benefit to the transferor. 3. c A call option on readily obtainable assets at fair value may not provide the transferor with more than a trivial benefit. Paragraph [860-10-40-35](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-35) provides an example in which, due to the combination of arrangements, the transferor would maintain effective control. ##### [860-10-40-28A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-28A) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:c195f6eb067fd89e4043a58c86cdac6794897e5e1ffcb630d4200ca17bda3b7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Effective control over transferred financial assets can be present even if the right to reclaim is indirect. For example, if a call allows a transferor to buy back the beneficial interests at a fixed price, the transferor may maintain effective control of the financial assets underlying those beneficial interests. If the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing activities, that entity may be constrained from choosing to pledge or exchange the transferred financial assets. In that circumstance, any call held by the transferor on third-party beneficial interests is effectively an attached call on the transferred financial assets. Depending on the price and other terms of the call, the transferor may maintain effective control over the transferred financial assets. ##### [860-10-40-29](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-29) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:ec00f60576887ef577c5dc4313f7d43b6238e32fdfc7af2e43deb6058255d515 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-10-40-30](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-30) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:06c5af5b9cec40155c7894c33f9cf828100c033f072eb24e40623e317daffd44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraphs [860-10-55-39 through 55-42C](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-39) for implementation guidance addressing how different types of rights of a transferor to reacquire (call) transferred financial assets affect sale accounting under this Subtopic. ##### [860-10-40-31](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-31) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:6ccc8c259397f0f70400ff22ff0c65db4b9f2c4a453801cccbaadd4e3543d0c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cash-settled call options do not constrain the transferee, nor do they result in the transferor maintaining effective control because they do not provide the transferor with an opportunity to reclaim the transferred financial assets. Therefore, this guidance addresses call options that can be physically settled. ##### [860-10-40-32](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-32) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:33647a76d046dcbc81ecbc7f1b747f5de839bd2bb7b2536390681d7e994f5b4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An [embedded call option](https://asc.understandingaccounting.org/glossary/e/#embedded-call-option "A call option held by the issuer of a financial instrument that is part of and trades with the underlying instrument. For example, a bond may allow the issuer to call it by posting a public notice well before its stated maturity that asks the current holder to submit it for early redemption and provides that interest ceases to accrue on the bond after the early redemption date. Rather than being an obligation of the initial purchaser of the bond, an embedded call option trades with and diminishes the value of the underlying bond.") would not result in the transferor's maintaining effective control because it is the issuer rather than the transferor who holds the call option and the call option does not provide more than a trivial benefit to the transferor. For example, a call embedded by the issuer of a callable bond or the borrower of a prepayable mortgage loan would not provide the transferor with effective control over the transferred financial asset. ##### [860-10-40-33](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-33) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:38fec3cd13461da629b57b32cefc74e4b6c5a0eee618671b25059dc62083d325 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-10-40-34](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-34) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:97405dec39a9c06ee9a6a99cd77a42e64d7b1b2313723041a56ae9a7754d6189 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [860-10-40-5(c)(2)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) excludes a cleanup call from the general principle that a transferor maintains effective control over transferred financial assets if the transferor has the unilateral ability to cause the holder to return specific financial assets and that ability provides more than a trivial benefit to the transferor. A cleanup call on beneficial interests in the transferred financial assets is permitted because burdensome costs in relation to benefits may arise when the remaining financial assets or beneficial interests fall to a small portion of their original level. Parties other than the servicer cannot hold the option, because only the servicer is burdened when the amount of outstanding financial assets falls to a level at which the cost of servicing the financial assets becomes burdensome—the defining condition of a cleanup call—and any other party would be motivated by some other incentive in exercising a call. ##### [860-10-40-35](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-35) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:7fbdcb3c0e74c6f5e47c0d4c0dfb73661113f64dda56d2b7bc70136ef0028883 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A right to reclaim specific transferred financial assets by paying their fair value when reclaimed generally does not maintain effective control if it does not convey a more-than-trivial benefit to the transferor. However, a transferor has maintained effective control if it has such a right and also holds the residual interest in the transferred financial assets. See paragraph [860-10-55-42A](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-42A) for discussion of a related example. ##### [860-10-40-36](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-36) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:1da096bece97f4f14f2d428c953608bdff406a505fe16c3a1ecb69ebbc016ee9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many transfers of financial assets that involve transfers of a group of entire financial assets to an entity whose sole purpose is to engage in securitization or asset-backed financing activities empower the transferor to reclaim assets subject to certain restrictions. Such a power is sometimes called a removal-of-accounts provision. Whether a removal-of-accounts provision precludes sale accounting depends on whether the removal-of-accounts provision results in the transferor's maintaining effective control over transferred financial assets. ##### [860-10-40-37](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-37) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:8de2590fe6cd1dcbe3ea6ca5419a03321fdee49e9f07f798d677adbdd03985aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of removal-of-accounts provisions that preclude transfers from being accounted for as sales: 1. a An unconditional removal-of-accounts provision or repurchase agreement that allows the transferor to specify the financial assets that may be removed and that provides a more-than-trivial benefit to the transferor, because such a provision allows the transferor unilaterally to remove specific financial assets 2. b A removal-of-accounts provision conditioned on a transferor's decision to exit some portion of its business that provides a more-than-trivial benefit to the transferor, because whether it can be triggered by canceling an affinity relationship, spinning off a business segment, or accepting a third party's bid to purchase a specified (for example, geographic) portion of the transferor's business, such a provision allows the transferor unilaterally to remove specific financial assets. ##### [860-10-40-38](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-38) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:ddc09934dc9e42c3e392616ecc9501f5342f6265adf0da9d9e70de03cfa3c46c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following are examples of removal-of-accounts provisions that do not preclude transfers from being accounted for as sales: 1. a A removal-of-accounts provision for random removal of excess financial assets, if the provision is sufficiently limited so that the transferor cannot remove specific transferred financial assets, for example, by limiting removals to the amount of the transferor's interests and to one removal per month 2. b A removal-of-accounts provision for defaulted receivables, because the removal would be allowed only after a third party's action (default) and could not be caused unilaterally by the transferor 3. c A removal-of-accounts provision conditioned on a third-party cancellation, or expiration without renewal, of an affinity or private-label arrangement, because the removal would be allowed only after a third party's action (cancellation) or decision not to act (expiration) and could not be caused unilaterally by the transferor 4. d A removal-of-accounts provision that does not allow the transferor to unilaterally reclaim specific financial assets from the transferee.For related implementation guidance, see paragraph [860-10-55-41](https://asc.understandingaccounting.org/asc/860/10/#860-10-55-41). ##### [860-10-40-39](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-39) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:0649798de3559da5a1ea2b1070fc1f633088cc5b1fbdabde9a8d9c1f4312c08d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A removal-of-accounts provision that can be exercised only in response to a third party's action that has not yet occurred does not maintain the transferor's effective control over financial assets potentially subject to that removal-of-accounts provision. #### Application of the Sale Criteria for Financial Instruments That Have the Potential to Be Assets or Liabilities ##### [860-10-40-40](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-40) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:fd9052cb6674cd01d27f86ba9571625136fa57c679f36150af3f3faca7206b66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Certain recognized financial instruments, such as forward contracts and swaps, have the potential to be financial assets or financial liabilities. Accordingly, transfers of those financial instruments must meet the conditions of both paragraphs [405-20-40-1](https://asc.understandingaccounting.org/asc/405/20/#405-20-40-1) and [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) to be derecognized. Paragraph [815-10-40-2](https://asc.understandingaccounting.org/asc/815/10/#815-10-40-2) states that transfers of assets that are derivative instruments and subject to the requirements of Subtopic 815-10 but that are not financial assets shall be accounted for by analogy to this Subtopic. The same criteria shall be applied to transfers of nonfinancial derivative instruments that have the potential to become either assets or liabilities (for example, forward contracts and swaps). #### Circumstances That Result in a Transferor Regaining Control of Financial Assets Previously Sold ##### [860-10-40-41](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-41) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:f64919caf723d882932426437bc4ebf832470e6b473b74f913462dfe7fe18108 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in law or other circumstance may result in a transferred portion of an entire financial asset no longer meeting the conditions of a participating interest (see paragraph [860-10-40-6A](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-6A)) or the transferor's regaining control of transferred financial assets after a transfer that was previously accounted for as a sale, because one or more of the conditions in paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) are no longer met. See the related guidance beginning in paragraph [860-20-25-8](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-8). ##### [860-10-40-42](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-42) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:bced7c205b7bbd5941c887851fc9aa1ce292e374ecba132562d37202480160eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-43](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-43) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:3ce49c400aca5cab24b6dd798c596d8d91be20e29924399cc782871eca97367f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-44](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-44) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:7675a9ace9b00dc8eebee9421dfb1c6424c4ea9efc35f2075381bed94be99ca6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-45](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-45) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:55d58bce8a4d5b7155b5fa60e3bf536e30bb7ecaf836b0d0e7459561f4e071f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-46](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-46) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:ee6e238969c3f74d00d22b37a1505371c5f8fcc07756eb3742a2bbfe0df6882a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/). ##### [860-10-40-47](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-47) Pending content: no Source downloaded (UTC): 2026-09-10T02:05:45.595Z to 2026-09-10T02:05:45.595Z Record version: sha256:eed27b728ab9e8af5ddc3bffdecb9f4f0f474cc3e04c491104ac55bcfc1c7be9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2014-11](https://asc.understandingaccounting.org/updates/asu-2014-11/).