What is ASC 310-30?
What is ASC 310-30?
FAS ASC 310-30 Accounting for Purchased Loans with Deteriorated Credit Quality.
What are purchased credit impaired loans?
Purchased Credit-Impaired Loans means those loans for which Company Bank accounts for in accordance with Accounting Standards Codification 310-30.
What is ASC 310?
ASC 310 comprises four Subtopics (Overall, Nonrefundable Fees and Other Costs, Loans and Debt Securities Acquired with Deteriorated Credit Quality, and Troubled Debt Restructurings by Creditors).
How is a purchased loan recorded at acquisition?
Purchased performing loans (and nonperforming revolving loans) are accounted for under ASC 310-20, and each loan is assigned a fair value mark based on the yield and credit adjustments. Under ASC 310-20, the entire fair value mark (discount/premium) is accreted/amortized into income.
What is a purchase loan?
A purchase money loan is issued to the buyer of a home by the seller. It is also called seller financing or owner financing. Purchase money loans are often used by buyers who have trouble getting a traditional mortgage due to poor credit.
What is loan accretion?
Accretion is a finance term that refers to the increment in the value of a bond after purchasing it at a discount and holding it until the maturity date. A bond is said to be purchased at a discount price when the purchase price falls below its par value.
What is FAS 114 now called?
A principal source of guidance on accounting for impairment in a loan portfolio under GAAP is Accounting Standards Codification Subtopic 310-10, which was formerly known as the Statement of Financial Accounting Standards No. 114 (FAS 114), “Accounting by Creditors for Impairment of a Loan.”
What is ASC Topic 321?
Topic 321, “Investments—Equity Securities,” of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) provides the ability to measure certain equity securities without a readily determinable fair value at cost, minus impairment, if any.
Which investment is subject to ASC 320 Investments Debt securities?
If a CD or GIC meets the definition of a debt security, it is within the scope of ASC 320. Depending on the type, form, and characteristics of the CD or GIC, it may meet the definition of a debt security.
How is a loan recorded Under SOP 03-3?
Under SOP 03-3, a purchased impaired loan is initially recorded at its fair value, which normally is the purchase price (see Example 1). In a purchase business combination, such a loan would be recorded at its allocated fair value (i.e., the present value of amounts to be received determined at an appropriate current interest rate).
What is a key principle of SOP 03-3?
A key principle of SOP 03-3 is a prohibition on the “carrying over” or creation of an allowance for loan losses when initially accounting for the purchase of an impaired loan. 1 The price that the purchaser is willing to pay for an impaired loan reflects the purchaser’s estimate of the credit losses over the life of the loan.
What is ASC 310-30 (SOP 03-3)?
If loans have a deterioration in credit quality after origination and it is probable that the acquiring institution will be unable to collect all contractually obligated payments from the borrower, then these loans are to be accounted for under the ASC 310-30 (SOP 03-3) method.
How does the SOP affect the purchase of loan portfolios?
The SOP will change banks’ current practices in accounting for purchased impaired loans. In purchase business combinations, the acquiring bank normally “carries over” the acquired institution’s allowance for loan losses when it records the acquired loan portfolio at fair value.
