# ASC 860-20-25: Transfers and Servicing — Sales of Financial Assets — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/860/20/#25-recognition) 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): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:3e91504ff564cbd0279e32a941332f29cfd5605abd633ccc225226eeeaf83d96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 860-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/860/20/#25-recognition) SEC content: no ##### [860-20-25-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:fc52af69548b7078cf8547a29b7c224936068d4b6a8f838e28996542a9fd3ec4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 860-20-40 provides derecognition guidance 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.") ([seller](https://asc.understandingaccounting.org/glossary/s/#seller "A transferor that relinquishes control over financial assets by transferring them to a transferee in exchange for consideration.")) applies upon completion of a [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.") 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.") that satisfies paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5)'s conditions to be accounted for as a sale. Upon completion of such a transfer, the transferor (seller) shall also recognize any assets obtained or liabilities incurred in the sale, including, but not limited to, any of the following: 1. a Cash 2. b Servicing assets 3. c Servicing liabilities 4. d In a sale of an entire financial asset or a group of entire financial assets, any of the following: 1. 1 The transferor's beneficial interest in the [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.") 2. 2 Put or call options held or written (for example, guarantee or recourse obligations) 3. 3 Forward commitments (for example, commitments to deliver additional receivables during the revolving periods of some [securitizations](https://asc.understandingaccounting.org/glossary/s/#securitization "The process by which financial assets are transformed into securities.")) 4. 4 Swaps (for example, provisions that convert interest rates from fixed to variable). See Examples 1, 2, and 5 (paragraphs [860-20-55-43 through 55-59](https://asc.understandingaccounting.org/asc/860/20/#860-20-55-43) ) for illustration of this guidance. ##### [860-20-25-2](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:98ba35ff80103998e1faf4a423bcb499cd447cf01ad508d0ece20af1046b1054 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although a transfer of securities may not be considered to have reached completion until the settlement date, this Subtopic does not modify other generally accepted accounting principles (GAAP) that require accounting at the trade date for certain contracts to purchase or sell securities. ##### [860-20-25-3](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:8e2d3ee42fb339c5550fab93b8df4b068c3280a9e917550671ff3438d128b1ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") shall recognize all assets obtained (including any [participating interest(s)](https://asc.understandingaccounting.org/glossary/p/#participating-interest "Paragraph 860-10-40-6A defines the term participating interest.") obtained) and any liabilities incurred. #### Assets Obtained and Liabilities Incurred as Proceeds ##### [860-20-25-4](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:ae722494bc438693db45e2b246b2458204e94d7444b16700543f4d06dc6b1647 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The proceeds from a sale of financial assets consist of the cash and any other assets obtained, including beneficial interests and separately recognized servicing assets, in the transfer less any liabilities incurred, including separately recognized servicing liabilities. Any asset obtained is part of the proceeds from the sale. Any liability incurred, even if it is related to the transferred financial assets, is a reduction of the proceeds. Any [derivative financial instrument](https://asc.understandingaccounting.org/glossary/d/#derivative-financial-instrument "A derivative instrument that is a financial instrument.") entered into concurrently with a transfer of financial assets is either an asset obtained or a liability incurred and part of the proceeds received in the transfer. ##### [860-20-25-5](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:1693a078159ee7e4f9788c7e7da429597f71d625a97d23e566939905da2c4482 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/). #### Distinguishing New Interests Obtained from Part of a Beneficial Interest Obtained ##### [860-20-25-6](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:92e8d128f23347e60e52bbbe8e9d78704babc6abcecb605f0651eb0b8eecb9a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining whether credit risk is a separate liability or part of a beneficial interest that has been obtained by the transferor, the transferor should focus on the source of cash flows in the event of a claim by the transferee. If the transferee can only look to cash flows from the underlying financial assets, the transferor has obtained a portion of the credit risk only through the interest it obtained and a separate obligation shall not be recognized. Credit losses from the underlying assets would affect the measurement of the interest that the transferor obtained. In contrast, if the transferor could be obligated for more than the cash flows provided by the interest it obtained and, therefore, could be required to reimburse the transferee for credit-related losses on the underlying assets, the transferor shall record a separate liability. It is not appropriate for the transferor to defer any portion of a resulting gain or loss (or to eliminate gain on sale accounting, as it is sometimes described in practice). ##### [860-20-25-7](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:73f991aed7733806814ab0a2a6a2b4c1d0a75d0b6f3f0a9d5eae5ac3c86dc6f2 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/). #### Regaining Control of Financial Assets Sold ##### [860-20-25-8](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:6c698b8b05fcf8fa77a32e689a9d30cf2b924ab966ca6dee5d7351bb41814bab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [860-10-40-41](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-41) explains that 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. ##### [860-20-25-9](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:269ff6f800a6e9e964b43dec28fe13254ecf7677ae0a77862e471ce56271449b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Such changes shall be accounted for in the same manner as a purchase of the transferred financial assets from the former transferee(s) in exchange for liabilities assumed unless they arise solely from either: 1. a Consolidation of an entity involved in the transfer at a subsequent date (see paragraph [860-20-25-10](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-10)) 2. b A change in market prices (for example, an increase in price that moves into the money 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.") on a non-readily-obtainable, transferred financial asset that was originally sufficiently out of the money that it was judged not to constrain the transferee). See the related guidance beginning in paragraph [860-20-25-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-1). ##### [860-20-25-10](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:95e198bdf09f1abec42f815199ef6373544683ff995655425aee28baf43b1cfe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After that change, the transferor shall do all of the following: 1. a Recognize in its financial statements those transferred financial assets together with liabilities to the former transferee(s) or beneficial interest holders of the former transferee(s). 2. b Not change the accounting for the servicing asset related to the previously sold financial assets. That is, even though the transferor has regained control over the previously sold assets, the cash flows from those assets will contractually be paid to the special-purpose entity, which will then distribute the proceeds to satisfy its contractual obligations (including obligations to the beneficial interest holders). Because the transferor, as servicer, is still contractually required to collect the asset's cash flows for the benefit of the special-purpose entity and otherwise service the assets, it shall continue to recognize the servicing asset and assess the asset for impairment if subsequently measured using the amortization method, as required by paragraph [860-50-35-9](https://asc.understandingaccounting.org/asc/860/50/#860-50-35-9). Once a servicing asset is recognized it shall not be added back to the underlying asset. Even when the transferor has regained control over the underlying assets through an event that triggers a transferor to rerecognize previously transferred assets that were accounted for as having been sold, the related servicing asset shall continue to be separately recognized. 3. c Continue to account for the transferor's interests in those underlying financial assets apart from any rerecognized financial assets. That is, the transferor's interests shall not be combined with and accounted for with the rerecognized financial assets. Example 10 (see paragraph [860-20-55-83](https://asc.understandingaccounting.org/asc/860/20/#860-20-55-83)) illustrates this guidance. However, a subsequent event that results in the transferor reclaiming those financial assets from the transferee, for example, the exercise of a removal-of-accounts provision or the consolidation by the transferor of the securitization entity in accordance with applicable GAAP, including the Variable Interest Entities Subsections of Subtopic 810-10, would result in a recombination of the transferor's interests with the underlying financial assets. For guidance on consolidation, which is relevant to determining whether a transferor must consolidate an entity involved in a transfer that was accounted for as a sale, see Topic 810. ##### [860-20-25-11](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:ffc6d93864f9640615a3503f021d706f1a15d7beae95767c1430dbcc75e978dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Whether the removal-of-accounts provision is exercised or not, the transferor shall recognize any financial assets subject to the removal-of-accounts provision if all of the following conditions are met: 1. a A third party's action (such as default or cancellation) or decision not to act (expiration) occurs. 2. b The occurrence allows removal of assets to be initiated solely by the transferor. 3. c The provision provides a more-than-trivial benefit to the transferor. For example, once a contingency is met (such as when a given loan goes into default), the call option on that asset (loan) is no longer contingent. ##### [860-20-25-12](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:1dfa7963d7555f5fda90c5e07023cf98004ce8c2fa88abc2c65f0ca313462f5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon application of paragraph [860-20-25-10](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-10), no gain or loss shall be recognized in earnings with respect to any of the transferor's [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."). A gain or loss may be recognized upon the exercise of a removal-of-accounts provision or similar contingent right with respect to the repurchased transferred financial assets that were sold if the removal-of-accounts provision or similar contingent right held by the transferor is not accounted for as a derivative instrument under Subtopic 815-10 and is not at the money, resulting in the fair value of those repurchased financial assets being greater or less than the related obligation to the transferee. ##### [860-20-25-13](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-13) Pending content: yes Source downloaded (UTC): 2026-09-10T02:06:28.412Z to 2026-09-10T02:06:28.412Z Record version: sha256:ede16de8b0dd3c9fb42f51b4b5f20a2ad8837c5c413c3caa2a667897432be36f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For financial assets rerecognized in accordance with paragraph [860-20-25-10](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-10), an entity shall initially recognize a financial asset at fair value. An entity shall then apply relevant guidance, including this Topic, Topic 310 on receivables, Topic 320 on investments—debt securities, Topic 321 on investments—equity securities, Topic 323 on investments—equity method and joint ventures, and Topic 325 on investments—other. In addition, an entity shall measure an allowance for credit losses in accordance with Topic 326, if applicable. 1. a For those financial assets that are not [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.") within the scope of Topic 326, an entity shall recognize an allowance for credit losses with a corresponding charge to credit loss expense as of the reporting date. 2. b For those financial assets that are purchased financial assets with credit deterioration (which includes beneficial interest that meets the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)) within the scope of Topic 326, an entity shall recognize an allowance for credit losses in accordance with Topic 326 with a corresponding increase to the amortized cost basis of the financial asset(s) as of the recognition date. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [326-10-65-7](https://asc.understandingaccounting.org/asc/326/10/#326-10-65-7)For financial assets rerecognized in accordance with paragraph [860-20-25-10](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-10), an entity shall initially recognize a financial asset at fair value. An entity shall then apply relevant guidance, including this Topic, Topic 310 on receivables, Topic 320 on investments—debt securities, Topic 321 on investments—equity securities, Topic 323 on investments—equity method and joint ventures, and Topic 325 on investments—other. In addition, an entity shall measure an allowance for credit losses in accordance with Topic 326, if applicable. 1. a For those financial assets that are not [purchased financial assets with credit deterioration](https://asc.understandingaccounting.org/glossary/p/#purchased-financial-assets-with-credit-deterioration "Acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by an acquirer's assessment. See paragraph 326-20-55-5 for more information on the meaning of similar risk characteristics for assets measured on an amortized cost basis.")or [purchased seasoned loans](https://asc.understandingaccounting.org/glossary/p/#purchased-seasoned-loans "(P) December 16, 2026; (N) December 16, 2026 326-10-65-7 Paragraphs 326-20-30-16326-20-30-17326-20-30-18 define the term purchased seasoned loans.")within the scope of Topic 326, an entity shall recognize an allowance for credit losses with a corresponding charge to credit loss expense as of the reporting date. 2. b For those financial assets that are purchased financial assets with credit deterioration (which includes beneficial interest that meets the criteria in paragraph [325-40-30-1A](https://asc.understandingaccounting.org/asc/325/40/#325-40-30-1A)) and purchased seasoned loans within the scope of Topic 326, an entity shall recognize an allowance for credit losses in accordance with Topic 326 with a corresponding increase to the amortized cost basis of the financial asset(s) as of the recognition date.