# ASC 860-20-40: Transfers and Servicing — Sales of Financial Assets — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/860/20/#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): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:924e7935f59482248838a8ac2c86df84458b77900a459b52c4bfe25b6ea60264 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 860-20-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/860/20/#40-derecognition) SEC content: no ##### [860-20-40-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:fa9dcdddea8dc4277e190d534586b7f646030244f0bb04ad38faf0b12a379f09 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 [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). #### Sale of a Participating Interest ##### [860-20-40-1A](https://asc.understandingaccounting.org/asc/860/20/#860-20-40-1A) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:e4eb79b1374f35733f3e5c1368e08aaa80f6b5879fa6154ea6d7a0cedf0efddf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 a [participating interest](https://asc.understandingaccounting.org/glossary/p/#participating-interest "Paragraph 860-10-40-6A defines the term participating interest.") that satisfies the conditions in paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) to be accounted for as a sale, the [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.") shall: 1. a Allocate the previous carrying amount of the entire [financial asset](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.") between both of the following on the basis of their relative fair values at the date of the transfer: 1. 1 The participating interest(s) sold 2. 2 The participating interest that continues to be held by the transferor. 2. b [Derecognize](https://asc.understandingaccounting.org/glossary/d/#derecognize "Remove previously recognized assets or liabilities from the statement of financial position.") the participating interest(s) sold 3. c Apply the guidance in paragraphs [860-20-25-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-1) and [860-20-30-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-30-1) on recognition and measurement of assets obtained and liabilities incurred in the sale 4. d Recognize in earnings any gain or loss on the sale 5. e Report any participating interest(s) that continue to be held by the transferor as the difference between the following amountsmeasured at the date of the transfer: 1. 1 The previous carrying amount of the entire financial asset 2. 2 The amount derecognized. For the transfer of a participating interest in a financial asset included in a closed portfolio hedged in an existing portfolio layer method hedge in accordance with Topic 815 on derivatives and hedging, when applying the guidance in (a) through (e) an entity shall not include any portion of the hedge basis adjustment that is maintained on the closed portfolio basis in accordance with paragraphs [815-20-25-12A(b)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-12A) and [815-25-35-1(c)](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1). #### Sale of an Entire Financial Asset or Group of Entire Financial Assets ##### [860-20-40-1B](https://asc.understandingaccounting.org/asc/860/20/#860-20-40-1B) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:e07f5193692194f4d47d515e69ba6e90a403e5d28adc9f7ea22e56bce547402a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon completion of a transfer of an entire financial asset or a group of entire financial assets that satisfies the conditions in paragraph [860-10-40-5](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-5) to be accounted for as a sale, the transferor (seller) shall: 1. a Derecognize 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. b Apply the guidance in paragraphs [860-20-25-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-1) and [860-20-30-1](https://asc.understandingaccounting.org/asc/860/20/#860-20-30-1) on recognition and measurement of assets obtained and liabilities incurred in the sale 3. c Recognize in earnings any gain or loss on the sale. If the transferred financial asset was accounted for under Topic 320 as available for sale before the transfer, item (a) requires that the amount in other comprehensive income be recognized in earnings at the date of transfer. If the transferred financial asset was included in a closed portfolio hedged in an existing portfolio layer method hedge in accordance with Topic 815 before the transfer, when applying the guidance in (a) through (c) an entity shall not include any portion of the hedge basis adjustment that is maintained on the closed portfolio basis in accordance with paragraphs [815-20-25-12A(b)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-12A) and [815-25-35-1(c)](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1). ##### [860-20-40-2](https://asc.understandingaccounting.org/asc/860/20/#860-20-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:da7b0c1a94558f2a40cd48828361ff3ef666aa9ca2b1e21e7c797c9db877c90c 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/). #### Transferor and Transferee Accounting Circumstances upon Regaining Control ##### [860-20-40-3](https://asc.understandingaccounting.org/asc/860/20/#860-20-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:06:38.468Z to 2026-09-10T02:06:38.468Z Record version: sha256:fbdacba323fc5fd8754d97937fbeb277d98375847ea7abdfe210cbf2b96329f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance beginning in paragraph [860-20-25-8](https://asc.understandingaccounting.org/asc/860/20/#860-20-25-8) discusses the transferor's accounting upon regaining control of financial assets sold. In such circumstances, the former transferee would derecognize the transferred financial assets on that date, as if it had sold the transferred financial assets in exchange for a receivable from the transferor.