What is ASC 860?

What is ASC 860?

ASC 860, Transfers and Servicing, provides comprehensive guidance to assist a transferor of financial assets to account for transactions that involve a transfer of a recognized financial asset or an interest therein.

How many subtopics does Topic 860 contain?

ASC 860 comprises five Subtopics, below is an overview of each Subtopic.

What is servicing of financial assets?

Servicing rights are recognized when a reporting entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety but retains the right to service the financial asset for a fee. Such rights are recognized even if the fee is zero or if the right to service is obtained from a third party.

What are the two main purposes uses of the FASB’s Concepts Statements?

What are the two main purposes/uses of the FASB’s Concepts Statements? -To set forth a common framework, for the Board’s use in guiding the development of new standards. -For use by practitioners, as a set of principles to consider in preparing financial statements.

How is ASC content organized?

Each ASC reference is structured as a series of four numbers separated by hyphens: a three-digit Topic (the first digit of which represents an Area), a two-digit Subtopic, a two-digit Section, and a two- or three-digit Paragraph. Subtopic 10 is always “Overall.”

What is transfer and servicing of financial assets?

A transfer of a financial assets can take many forms; from the sale of a widely-held equity security for cash to sales of trade receivables to a securitization entity in exchange for cash, a subordinated economic interest in the receivables, and servicing rights.

Is a repurchase agreement an asset?

While a repurchase agreement involves a sale of assets, it is treated as a loan for tax and accounting purposes.

What is a repurchase agreement Example?

How Does a Repurchase Agreement (Repo) Work? For example, trader A may sell a specific security to trader B for a set price and agree to buy back the security for a specified amount at a later date. In actuality, however, the sale is not a real sale, but rather a loan, secured by the security.

What is FRF in audit?

The term financial reporting framework is defined as a set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.

What does ASC stand for?

ASC

WHO issues repurchase agreements?

United States Federal Reserve use of repos Under a repurchase agreement, the Federal Reserve (Fed) buys U.S. Treasury securities, U.S. agency securities, or mortgage-backed securities from a primary dealer who agrees to buy them back within typically one to seven days; a reverse repo is the opposite.

What is ASC 860 and how does it affect transfer accounting?

Perhaps most importantly, ASC 860 prescribes the conditions that a transfer must satisfy to allow the transferor to derecognize the financial asset from its balance sheet. The guidance in ASC 860 addresses not only the transferor’s accounting, but also informs the corresponding accounting by the transferee.

What are the ASC 860 disclosure requirements for securitizations?

For securitizations that achieve sale accounting and the transferor has some form of continuing involvement with those transferred assets, ASC 860 requires specific disclosures for each income statement period presented in the financial statements. The transferor should disclose:

What is the difference between ASC 860 and IAS 39?

While ASC 860, Transfers and Servicing, focuses on whether a transferor has surrendered control over a financial asset, IAS 39 applies a combination of risks and rewards and control tests.

What is ASC 860’S derecognition guidance?

The guidance in ASC 860 addresses not only the transferor’s accounting, but also informs the corresponding accounting by the transferee. ASC 860’s derecognition model incorporates the so-called financial components approach.