Financial instruments

ASC 210-20 states the general principle that offsetting assets and liabilities on the balance sheet is improper unless a right of setoff exists, and sets the four conditions for a right of setoff (210-20-45-1): two parties owe each other determinable amounts, the reporting party has the right to set off, intends to set off, and the right is enforceable at law (including in bankruptcy). It also provides a narrow exception permitting (but not requiring) offsetting of payables and receivables under same-counterparty, same-settlement-date repurchase and reverse repurchase agreements accounted for as collateralized borrowings that meet all conditions in 210-20-45-11, and it imposes extensive netting disclosures for derivatives, repos/reverse repos, and securities borrowing/lending subject to enforceable master netting arrangements.

ASC 210-940 addresses how brokers and dealers offset and combine amounts presented in the balance sheet. It contains no independent offsetting rules; it simply directs preparers to the general offsetting guidance in Section 210-20-45 and adopts the scope of the Financial Services—Brokers and Dealers Overall Subtopic (940-10-15).

ASC 310-10 is the Overall subtopic for receivables, providing general guidance on recognizing, measuring, presenting, and disclosing loans and trade receivables (including factoring, loan syndications, standby commitments to purchase loans, purchased credit card portfolios, and secured loans), plus a separate set of Subsections on acquisition, development, and construction (ADC) arrangements. Receivables held for the foreseeable future are carried at amortized cost basis (with credit losses under Topic 326), while nonmortgage loans held for sale are carried at the lower of amortized cost basis or fair value through a valuation allowance. The ADC Subsections tell a lender whether an arrangement in which it participates in expected residual profit is a loan, a real estate investment, or a real estate joint venture; most of the old impairment/TDR guidance in this subtopic was superseded by ASU 2016-13 and ASU 2022-02, leaving modification disclosures behind.

ASC 310-20 governs how lenders and loan purchasers account for nonrefundable fees, origination costs, commitment fees, syndication fees, credit card fees, and purchase premiums/discounts. The core rule is that loan origination fees and direct loan origination costs are deferred, offset, and recognized only as a net amount over the life of the loan as a yield (interest income) adjustment using the interest method; all other lending-related costs (advertising, solicitation, servicing, unsuccessful efforts, occupancy, equipment) are expensed as incurred. It also prescribes when a refinancing/restructuring is treated as a new loan versus a carryover of unamortized net fees and costs.

ASC 310-30 formerly governed loans and debt securities acquired with evidence of deteriorated credit quality (so-called purchased credit-impaired assets), where it was probable at acquisition that the investor would not collect all contractually required payments receivable; it required accreting the excess of expected cash flows over the initial investment into interest income as accretable yield and prohibited carrying over or creating a valuation allowance at acquisition. Every substantive paragraph of this subtopic has been superseded by Accounting Standards Update No. 2016-13 (CECL). Purchased financial assets with credit deterioration are now accounted for under Subtopics 326-20 and 326-30.

ASC 310-40 formerly contained the creditor's accounting for troubled debt restructurings (TDRs) — the definition of a TDR, measurement of impairment on restructured loans, accounting for assets or equity interests received in satisfaction of a receivable, and TDR-specific disclosures. Every operative paragraph has been superseded, principally by ASU 2022-02 (which eliminated the TDR model for creditors that have adopted ASC 326), with earlier deletions by ASU 2016-13 and ASU 2014-09. The subtopic is now an empty shell: creditors account for modifications to borrowers experiencing financial difficulty under ASC 326 and ASC 310-10 instead.

ASC 310-940 is a "link" subtopic: it contains no substantive accounting guidance of its own. It simply directs readers looking for guidance on receivables of brokers and dealers in securities to other locations in the Codification — specifically, Subtopic 940-325 for receivables arising as part of a financial-restructuring transaction (310-940-05-2).

This subtopic governs how mortgage banking entities account for mortgage loans and mortgage-backed securities, including classification as held for sale versus held for long-term investment, related origination fees and costs, and transactions with affiliates. Loans held for sale are carried at the lower of amortized cost basis or fair value through a valuation allowance charged to income, while loans held for long-term investment are carried at amortized cost basis with credit losses measured under Subtopic 326-20. Transfers between classifications require reversal in earnings of any previously recorded allowance and re-measurement under the new classification.

ASC 320-10 governs the accounting and reporting for all investments in debt securities (post-ASU 2016-01, equity securities moved to Topic 321). At acquisition an entity must classify each debt security as trading, available-for-sale, or held-to-maturity (320-10-25-1) and document that classification (320-10-25-2); trading and AFS securities are carried at fair value (unrealized gains/losses in earnings and OCI, respectively) while HTM securities are carried at amortized cost (320-10-35-1). The Subtopic's core tension is the restrictive "positive intent and ability to hold to maturity" standard, the narrow list of sales/transfers that do not "taint" the HTM portfolio, and the required category disclosures.

This subtopic governs how broker-dealers account for investments in debt and equity securities, covering both clearance/settlement activities (General) and proprietary trading (Proprietary Trading Securities). The core rules are that all regular-way trades are reflected on a trade-date basis (320-940-25-1), and proprietary security positions — both inventory and obligations for short inventory positions — are measured initially and subsequently at fair value with unrealized gains and losses included in profit or loss (320-940-30-2, 35-1, 35-2).

This industry Subtopic supplements ASC 320-10 for depository and financial institutions (banks, thrifts, savings banks, credit unions, finance companies, insurance entities), addressing how they measure and disclose investments in debt and equity securities. Its core content is disclosure: securities must be broken out by prescribed major security types and by at least four maturity groupings, collateral pledged must be disclosed, and the accounting policy (including basis for classification) explained. It also confirms that amortization or accretion of debt securities generally runs from the purchase date to maturity, and that bank regulators' general divestiture authority does not by itself defeat held-to-maturity classification.

ASC 320-944 was the insurance-industry ("Financial Services—Insurance") incremental guidance layered onto Investments—Debt Securities. Every paragraph in this subtopic (05-1, 15-1, 15-2, 25-1, 50-1, 50-2) has been superseded by Accounting Standards Update No. 2016-01, so the subtopic contains no operative guidance. Insurance entities now follow the general guidance in ASC 320 for debt securities and ASC 321 for equity securities.

ASC 320-954 was the health care entities industry supplement to the debt securities guidance in Topic 320, addressing scope, subsequent measurement, presentation (including where unrealized gains and losses appear in a health care entity's performance indicator) and related implementation examples. Every paragraph in the subtopic — Sections 05, 15, 35, 45 and 55 — was superseded by Accounting Standards Update No. 2016-01. As a result the subtopic contains no operative guidance; health care entities look instead to Topic 320 as amended and to Topic 321 for equity securities.

This Subtopic (codified as 958-320) governs how not-for-profit entities account for investments in debt securities and sets disclosure rules for most NFP investments. The core rule is simple and different from the business-entity model: all debt securities held by an NFP are carried at fair value in the statement of financial position, with no held-to-maturity, trading, or available-for-sale classification. Purchased securities are initially measured at acquisition cost (excluding brokerage and other transaction fees); contributed securities and those received in agency transactions are initially measured at fair value.

ASC 321-10 governs the accounting for investments in equity securities and other ownership interests (partnerships, unincorporated joint ventures, LLCs) that are not consolidated, not accounted for under the equity method, and not derivatives. The default rule is fair value measurement in the balance sheet with all unrealized holding gains and losses (and dividend income) recognized in earnings (321-10-35-1, 35-6). As an alternative, an entity may elect, investment by investment, a "measurement alternative" for an equity security without a readily determinable fair value: cost minus impairment, adjusted up or down for observable price changes in orderly transactions for identical or similar investments of the same issuer (321-10-35-2).

This subtopic (codified as 958-321) sets the incremental rules for how not-for-profit entities account for investments in equity securities and other ownership interests, layering on top of the general guidance in Topic 321. Equity securities purchased are initially measured at acquisition cost excluding brokerage and transaction fees; those received as contributions or through agency transactions are initially measured at fair value, with subsequent measurement following Topic 321. Investments held by an NFP as agent with little or no discretion over use of the income and gains are reported as agency transactions—changes in assets and liabilities, not changes in net assets.

This subtopic tells investment companies how (and whether) to apply the equity method of Topic 323. The general rule is that an investment company does not use the equity method for its noncontrolling ownership interests; instead it measures those investments at fair value under Subtopic 946-320. The one exception is an investment in an operating entity that provides services to the investment company (e.g., an investment adviser or transfer agent), which is accounted for under the equity method if it otherwise qualifies.

ASC 325-10 is the Overall subtopic of Investments—Other, the residual investments Topic in the Codification. It mainly serves as a roadmap: it explains that investment accounting is split across Topics 320 (debt securities), 321 (equity securities), 323 (equity method and joint ventures), and 325 (other investments), and it lists the Subtopics within Topic 325 — Overall, Investments in Insurance Contracts (325-30), and Beneficial Interests in Securitized Financial Assets (325-40). It contains no substantive recognition or measurement guidance of its own.

ASC 325-20 formerly governed the cost method of accounting for equity securities without a readily determinable fair value (cost-method investments), including their initial measurement, impairment assessment, and disclosure. Every substantive paragraph in the subtopic was superseded by ASU 2016-01, so the subtopic is now an empty shell with no operative guidance. Equity investments previously accounted for under the cost method are now within the scope of ASC 321, Investments—Equity Securities.

ASC 325-40 governs how a holder recognizes interest income on beneficial interests in securitized financial assets — both a transferor's retained interests in securitizations accounted for as sales under Topic 860 and purchased beneficial interests. The holder measures accretable yield at acquisition as the excess of cash flows expected to be collected (or contractual cash flows, for PCD beneficial interests) over the initial investment (or initial amortized cost basis), and accretes it into interest income using the effective yield method. Expected cash flows must be updated each period; favorable or adverse changes are run first through the credit loss guidance in Topic 326, with any residual change adjusting accretable yield prospectively.

ASC 325-944 was the insurance-industry ("Investments—Other, Insurance") guidance within the Investments—Other topic, but every paragraph in the subtopic (Sections 05, 15, 30, 35, 40, 45, and 50) has been superseded by Accounting Standards Update No. 2016-01. As a result, the subtopic contains no operative recognition, measurement, derecognition, presentation, or disclosure requirements. Entities in the insurance industry must instead apply the equity-security and other-investment guidance retained elsewhere, principally ASC 321 and ASC 320 as amended by ASU 2016-01.

ASC 326-10 is the Overall subtopic of the credit losses Topic: it states the Topic's purpose (how an entity measures credit losses on financial instruments), identifies its three subtopics (Overall; Measured at Amortized Cost; Available-for-Sale Debt Securities), and applies to all entities. Its substantive content today is largely scope plus the transition/effective-date paragraphs in Section 65 for recent ASUs, since the CECL-adoption transition paragraphs from ASU 2016-13 and related updates were superseded on 06/21/2024 once the transition period ended.

ASC 326-20 is the CECL (current expected credit loss) model for financial assets measured at amortized cost, net investments in leases, off-balance-sheet credit exposures, and reinsurance recoverables. At every reporting date an entity records an allowance (a valuation account deducted from amortized cost) equal to management's current estimate of all credit losses expected over the contractual term, based on past events, current conditions, and reasonable and supportable forecasts, with a reversion to historical loss information beyond the forecastable period (326-20-30-1, 30-6, 30-9). Assets are pooled when they share similar risk characteristics and evaluated individually only when they do not (326-20-30-2).

ASC 326-30 governs measurement of credit losses on debt securities classified as available-for-sale (AFS), including loans meeting the definition of debt securities classified as AFS. Unlike the pooled CECL model in 326-20, impairment is assessed at the individual security level: when fair value is below amortized cost, the entity determines how much of the decline is credit-related by comparing the present value of expected cash flows with amortized cost, records that amount as an allowance for credit losses (capped at the amount fair value is below amortized cost), and puts the remaining decline in other comprehensive income. If the entity intends to sell or more likely than not must sell before recovery, the allowance is written off and the security is written down to fair value through earnings.

ASC 405-20 governs when a debtor may derecognize a liability because it has been extinguished. Under 405-20-40-1, extinguishment occurs if and only if the debtor pays the creditor (cash, other financial assets, goods or services, or reacquisition of its own debt securities) and is relieved of the obligation, or the debtor is legally released as primary obligor judicially or by the creditor. The Subtopic also contains special derecognition (breakage) rules for liabilities from prepaid stored-value products and excludes debt conversions and troubled debt restructurings (see 470-20 and 470-60).

This Subtopic addresses liabilities of brokers and dealers in securities, specifically stock-loan and repurchase (repo) transactions entered into to finance investment positions in lieu of a bank loan. Topic 860 supplies the general accounting for whether such transactions are sales or financings. If they are accounted for as financing transactions, the related rebate or interest expense must be presented in the income statement separately from any trading gains or losses.

ASC 470-20 governs the issuer's accounting for debt with detachable warrants, convertible debt instruments, interest forfeited on conversion, induced conversions, conversions triggered by the issuer's call, and own-share lending arrangements entered into in contemplation of a convertible debt offering. After ASU 2020-06 eliminated the cash conversion and beneficial conversion feature models, the default rule is that convertible debt is accounted for in its entirety as a liability with no proceeds allocated to the conversion feature (470-20-25-12), unless the feature must be bifurcated as a derivative under 815-15 or the debt was issued at a substantial premium (470-20-25-13). Proceeds of debt issued with detachable warrants, by contrast, are allocated between the debt and the warrants based on relative fair values (470-20-25-2).

ASC 470-50 governs the debtor's accounting for extinguishments of debt and for modifications or exchanges of debt instruments with the same creditor (excluding troubled debt restructurings under 470-60 and conversions pursuant to conversion privileges under 470-20). Its core rule is the "10 percent cash flow test": if the present value of cash flows under the new instrument differs by at least 10% from the PV of the remaining cash flows of the original instrument (discounted at the original instrument's effective rate), the terms are substantially different and the transaction is accounted for as an extinguishment, with the new debt recorded at fair value and gain or loss recognized currently in income. If not substantially different, no gain or loss is recognized and a new effective interest rate is computed from the original carrying amount and revised cash flows.

ASC 480-10 tells an issuer when a freestanding financial instrument with characteristics of both liabilities and equity must be classified as a liability (or, in some cases, an asset) rather than equity. It captures three classes of instruments: (1) mandatorily redeemable financial instruments (480-10-25-4); (2) obligations, other than outstanding shares, to repurchase the issuer's own equity shares by transferring assets (480-10-25-8); and (3) certain obligations settleable in a variable number of shares whose monetary value is fixed, indexed to something other than the issuer's shares, or varies inversely with the issuer's share price (480-10-25-14). Measurement is generally fair value, except that mandatorily redeemable instruments and physically settled fixed-share forward purchase contracts are accreted to the settlement amount with the change recognized as interest cost.

This Subtopic governs how a mortgage banking enterprise accounts for fees it pays to permanent investors to assure the ultimate sale of residential or commercial loans. Such commitment fees are expensed when the loans are actually sold to the permanent investor, or earlier if it becomes evident the commitment will not be used. Because residential commitments typically cover blocks of loans, the fee is allocated to individual loan transactions on the ratio of the individual loan amount to the total commitment amount.

ASC 815-10 is the Overall subtopic of the derivatives and hedging Topic: it defines what a derivative instrument is, sets the scope (including a long list of scope exceptions), and requires that derivatives be recognized as assets or liabilities on the statement of financial position and measured at fair value. A contract is a derivative only if it has (1) one or more underlyings and one or more notional amounts or payment provisions, (2) no or a smaller-than-usual initial net investment, and (3) the ability to be settled net (815-10-15-83). If conditions are met, an entity may elect to designate a derivative as a fair value hedge, cash flow hedge, or hedge of foreign currency exposure (including a net investment in a foreign operation).

ASC 815-15 governs when a derivative-like feature embedded in a contract that is not itself a derivative in its entirety (a "hybrid instrument") must be separated ("bifurcated") from the host contract and accounted for as a standalone derivative under Subtopic 815-10. Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: the embedded feature's economic characteristics and risks are not clearly and closely related to the host, the hybrid is not already remeasured at fair value through earnings, and a freestanding instrument with the same terms would be a derivative. As an alternative, an entity may irrevocably elect to measure the entire hybrid financial instrument at fair value through earnings (815-15-25-4), and if it cannot reliably identify and measure the embedded derivative it must measure the whole contract at fair value through earnings (815-15-25-53).

ASC 815-20 sets the general "gatekeeping" rules for hedge accounting that apply to all three hedge types — fair value, cash flow, and net investment hedges. It requires formal designation and documentation at hedge inception (risk management objective, hedging instrument, hedged item, hedged risk, and the effectiveness assessment method), and it specifies which items and transactions may be designated as hedged items, which risks may be designated as the hedged risk, which instruments may be hedging instruments, and how effectiveness must be assessed. Items outside those criteria (e.g., equity method investments, most intra-entity transactions, an entity's own equity) simply cannot be hedged for accounting purposes.

ASC 815-25 supplies the incremental accounting rules for fair value hedges that qualify under the designation criteria in ASC 815-20. The core mechanic (815-25-35-1) is that the gain or loss on the hedging instrument goes to current earnings, and the change in fair value of the hedged item attributable to the hedged risk adjusts the hedged item's carrying amount and also goes to current earnings, both presented in the same income statement line item as the hedged item's earnings effect; any mismatch therefore falls automatically into earnings. The Subtopic also governs basis adjustments and their amortization, portfolio layer method hedges of closed portfolios, interaction with impairment/credit loss rules, and mandatory or voluntary discontinuation of hedge accounting.

ASC 815-35 governs the subsequent measurement of hedges of a net investment in a foreign operation (designated under 815-20). The effective portion of the gain or loss on the hedging derivative — or the foreign currency transaction gain or loss on a nonderivative hedging instrument such as foreign-currency debt — is reported the same way as a translation adjustment, i.e., in the cumulative translation adjustment (CTA) section of other comprehensive income (815-35-35-1). An entity elects either the spot method or the forward method to assess effectiveness and must apply that choice consistently to all derivative net investment hedges (815-35-35-4).

ASC 815-40 governs contracts (freestanding or embedded) that are indexed to, and potentially settled in, an entity's own stock — warrants, written/purchased options, forward sale and purchase contracts, and conversion features. It supplies the two-part test for the derivative scope exception in 815-10-15-74(a): whether the instrument is "indexed to the entity's own stock" (two-step analysis in 815-40-15-7 through 15-7I) and whether it would be classified in stockholders' equity (conditions in 815-40-25-7 through 25-30). Equity-classified contracts stay in permanent equity with no remeasurement; contracts failing either part are assets or liabilities measured at fair value through earnings, with classification reassessed every balance sheet date.

This Subtopic applies Topic 815's derivative and hedging guidance to insurance entities, chiefly for long-duration contracts such as variable annuities. Its core rules are that a traditional variable annuity contract is not a hybrid instrument containing an embedded derivative requiring bifurcation (815-944-25-1 through 25-2), that the traditional variable annuity serves as the host contract for a nontraditional variable annuity whose other features (excluding market risk benefits) may be embedded derivatives (815-944-25-5), and that these conclusions are exceptions that may not be analogized to other structures (815-944-25-3, 25-6). It also illustrates when an insurer may apply cash flow hedge accounting to forecasted interest credited on surrenderable fixed-rate contracts.

ASC 815-958 is a link-only subtopic: it contains no substantive rules of its own but points not-for-profit entities to the derivatives guidance that applies to them. It directs readers to 958-30-25-7 through 25-14 to decide whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative requiring bifurcation under 815-15-25-1, and (upon transition) to 815-20-25-3A and 815-20-25-143 for the timing of hedge documentation and hedge effectiveness assessments by certain NFPs.

ASC 818-10 is the Overall subtopic of the new Environmental Credits and Environmental Credit Obligations Topic (created by ASU 2026-02), which sets the accounting and reporting requirements for entities that acquire, internally generate, or receive environmental credits and for entities subject to regulatory compliance programs (e.g., cap-and-trade, renewable portfolio or fuel standards) that create environmental credit obligations. It applies to all environmental credits and environmental credit obligations, and items within its scope are excluded from derivatives accounting under Topic 815. The objective is to give investors useful information about the amount, timing, and uncertainty of cash flows from these transactions.

This industry Subtopic supplements ASC 820 for brokers and dealers in securities. It lists non-exhaustive factors broker-dealers have considered in determining the fair value of a financial instrument (issuer's financial standing, market liquidity, restrictions on salability, pending offerings or reorganizations, dealer pricing, recent trades, etc.) and requires specific disclosure when an instrument is carried below its quoted price.

ASC 825-10 provides the overall guidance for financial instruments, containing two sets of rules: the fair value option (FVO), which lets any entity irrevocably elect, at specified election dates, to measure eligible financial assets, financial liabilities, firm commitments, and written loan commitments at fair value with changes in earnings; and incremental disclosures about the fair value of financial instruments, concentrations of credit risk, and market risk. The FVO is elected instrument by instrument, only for an entire instrument (not specific risks or cash flows), and is intended to mitigate earnings volatility from measuring related assets and liabilities differently without applying hedge accounting.

This Subtopic sets the disclosure requirements for depository and lending institutions that hold financial instruments with off-balance-sheet credit risk — loan commitments, standby letters of credit, financial guarantees, loans sold with recourse, and similar instruments. For each such instrument an entity must disclose the face or contract amount, the nature and terms (including credit and market risk, cash requirements, and related accounting policy), and its collateral policies. Instruments within the scope of Topic 815 (derivatives) are excluded.

This subtopic applies the financial instruments guidance to insurance entities, covering investment contracts and disclosures about concentrations of credit risk arising from reinsurance contracts. Amounts received under investment contracts are not revenue; they are recorded as liabilities and accounted for like interest-bearing or other financial instruments, with related deferred acquisition costs reported as an asset. Ceding entities must disclose credit risk concentrations for reinsurance recoverables and prepaid reinsurance premiums, and must disclose the carrying amount of securities deposited with state regulatory authorities.

This subtopic gives industry-specific guidance on financial instruments for not-for-profit, business-oriented health care entities. Its single substantive rule is a presentation rule: when such an entity elects the fair value option, the resulting unrealized gains and losses must be reported inside the performance indicator (or within discontinued operations, as appropriate) rather than outside it.

ASC 835-10 is the Overall subtopic of the Interest Topic; it does little more than map the Topic's structure and point readers elsewhere. It explains that Topic 835 addresses interest recognition in two instances — capitalization of interest costs incurred in connection with an investment in an asset (Subtopic 835-20) and imputation of interest where required (Subtopic 835-30) — and acknowledges that interest income/expense for specific transactions and instrument types is governed by other Topics.

This Subtopic governs when an investor-lender may recognize interest income on loans or advances made to a real estate venture (e.g., a joint venture in which the investor holds an equity interest). The core rule is that interest income must be deferred where collectibility is doubtful or other investors may not bear their share of losses; it is recognized in full only where the venture has expensed the interest (or the investor adjusts its equity pickup as if it had); otherwise a portion is deferred in proportion to the investor's interest in the venture's profits and losses (835-970-35-1).

ASC 848-10 was the "Overall" subtopic of Topic 848, Reference Rate Reform, which provided optional expedients and exceptions for contract modifications, hedge accounting, and other transactions affected by the discontinuation of LIBOR and other reference rates. As presented, every paragraph in this subtopic has been superseded — the substantive guidance in Sections 05 through 55 was superseded by ASU 2020-04 and ASU 2021-01, and the transition paragraphs (848-10-65-1 and 65-2) were superseded on 07/02/2026 at the end of the transition period set by ASU 2020-04, ASU 2021-01, and ASU 2022-06 (which deferred the sunset date). The practical result is that Topic 848 relief is time-limited and no longer available after the sunset date.

ASC 848-20 was the placeholder subtopic for contract modifications under Reference Rate Reform, but every paragraph in it has been superseded — Sections 05, 15, 35, and 55 were all superseded by ASU 2020-04 (with 848-20-15-2A superseded by ASU 2021-01). As a result, 848-20 contains no operative guidance; the optional expedients for modifications of contracts affected by reference rate reform now reside in ASC 848-20's replacement guidance within Topic 848 (principally 848-10 scope and the successor modification/hedging subtopics). Students should treat this subtopic as an empty shell and look to the current Topic 848 guidance instead.

ASC 848-30 was the placeholder subtopic for general hedging guidance under the reference rate reform relief in Topic 848, but every paragraph in it has been superseded — the Section 05, 15, and 25 paragraphs by ASU 2020-04, and paragraphs 848-30-25-7A, 25-11A, 25-11B, and 25-11C by ASU 2021-01. As a result, the subtopic currently contains no operative recognition, scope, or overview guidance. Practitioners seeking the optional expedients and exceptions for hedge accounting relationships affected by the discontinuation of LIBOR and other reference rates must look to the other subtopics of Topic 848, principally 848-40 and 848-50.

ASC 848-40 was the placeholder subtopic for fair value hedges within Topic 848, Reference Rate Reform. Every paragraph in its Overview (05), Scope (15), and Recognition (25) sections was superseded by ASU 2020-04, so the subtopic contains no operative guidance. Optional expedients and exceptions for fair value hedging relationships affected by reference rate reform reside instead in ASC 848-50 (Hedging — General) and the related hedging subtopics.

ASC 848-50 was the Reference Rate Reform subtopic addressing cash flow hedges, but every paragraph in it has been superseded (almost entirely by ASU 2020-04, with one paragraph superseded by ASU 2021-01). As codified today it contains no operative guidance; the optional expedients and exceptions for hedging relationships affected by reference rate reform reside in the surviving subtopics of Topic 848.

ASC 860-10 is the Overall subtopic for Transfers and Servicing; it sets the scope for the whole topic and, critically, states the derecognition test for transferred financial assets. Under 860-10-40-5, a transfer of an entire financial asset, group of entire financial assets, or a participating interest is a sale if and only if (a) the assets are legally isolated from the transferor even in bankruptcy, (b) each transferee (or beneficial interest holder) can pledge or exchange what it received without a constraint that gives the transferor more than a trivial benefit, and (c) the transferor does not maintain effective control. If any condition fails, the transfer is accounted for as a secured borrowing under 860-30.

ASC 860-20 tells a transferor what to record once a transfer of financial assets qualifies as a sale under 860-10-40-5, and what happens if the transferor later regains control. For a sale of entire financial assets, the transferor derecognizes the assets, recognizes at fair value all assets obtained and liabilities incurred (cash, servicing assets/liabilities, beneficial interests, options, forwards, swaps), and books the gain or loss in earnings; for a participating interest, the prior carrying amount is allocated between the interest sold and the interest retained on relative fair values. If a change in law or circumstance causes the transferor to regain control, it rerecognizes the assets and related liabilities at fair value as if it purchased them, with no gain or loss on its beneficial interests.

ASC 860-30 governs transfers of financial assets that fail the sale conditions and therefore must be accounted for as secured borrowings, plus the accounting for collateral pledged in such transactions. The transferor keeps the transferred asset on its balance sheet with no change in measurement basis (860-30-25-2), reclassifying it separately (e.g., "securities pledged to creditors") if the secured party may sell or repledge it (860-30-45-1). Cash collateral — and securities collateral the holder may sell or repledge — is treated as proceeds of a borrowing rather than as collateral, and is recognized as an asset by the recipient with a corresponding obligation to return it (860-30-25-3, 25-8).

ASC 860-40 formerly governed transfers of financial assets to qualifying special-purpose entities (QSPEs), which under pre-2010 GAAP were exempt from consolidation and could support sale accounting for the transferor. Every substantive paragraph in the subtopic (Sections 05, 10, 15, 25, 40, 45 and 55) was superseded by ASU 2009-16 (formerly FAS 166), which eliminated the QSPE concept entirely. The subtopic is now an empty shell retained only for reference; transfers to securitization entities are analyzed under the general derecognition conditions of ASC 860-10 and the consolidation guidance in ASC 810.

ASC 860-50 governs when a servicer must separately recognize a servicing asset or servicing liability and how to measure it. A servicing contract is recognized separately each time an entity undertakes an obligation to service financial assets through a qualifying sale of an entire financial asset, group of entire financial assets, or participating interest, or through an acquisition/assumption of servicing for others' assets (860-50-25-1); it is initially measured at fair value (860-50-30-1) whether or not explicit consideration is exchanged. Subsequently, each class of servicing assets and liabilities is measured using either the amortization method (with impairment tested by stratum via a valuation allowance) or the irrevocable fair value measurement method (860-50-35-1).

ASC 940-10 is the Overall subtopic of the Financial Services—Brokers and Dealers Topic, which lists the Topic's constituent subtopics (Broker-Dealer Activities, Receivables, Investments, Other Assets and Deferred Costs, Liabilities, Consolidation, and Fair Value Measurements) and sets its scope. The Topic applies to all entities that are brokers and dealers in securities and supplies only incremental industry-specific guidance; broker-dealers must still follow all other applicable GAAP outside the Topic.

ASC 948-10 is the Overall subtopic for mortgage banking, providing background on the two core mortgage banking activities—originating/purchasing loans for sale to permanent investors and subsequently servicing those loans—and defining the Topic's scope. Its only substantive requirements are disclosures about minimum net worth (capital) requirements imposed by secondary market investors and state regulators, including whether the entity complies and the effects of noncompliance. The Topic supplies only incremental industry guidance; entities must also apply all other applicable GAAP.