secured borrowing

This Subtopic gives industry-specific presentation and disclosure rules for the borrowings and long-term obligations of depository and lending institutions. Significant categories of borrowings must appear as separate balance sheet line items (or one line with note detail of components), mortgage transfers treated as secured borrowings under Topic 860 must be shown as debt separately from advances, other notes payable and subordinated debt, and notes must describe the principal terms of each debt agreement. Fair value estimates of deposit liabilities must exclude core deposit intangibles.

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 860-30 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).