8.1 Presentation

ASC 320-10

45-9 Subsequent increases or decreases in the fair value of available-for-sale securities that do not result in recognition or reversal of an allowance for credit loss or write-down in accordance with Subtopic 326-30 on measuring credit losses on available-for-sale debt securities shall be included in other comprehensive income pursuant to paragraphs 320-10-35-1(b) and 320-10-45-8.

ASC 326-20

45-1 For financial assets measured at amortized cost within the scope of this Subtopic, an entity shall separately present on the statement of financial position, the allowance for credit losses that is deducted from the asset’s amortized cost basis.

45-2 For off-balance-sheet credit exposures within the scope of this Subtopic, an entity shall present the estimate of expected credit losses on the statement of financial position as a liability. The liability for credit losses for off-balance-sheet financial instruments shall be reduced in the period in which the off-balance-sheet financial instruments expire, result in the recognition of a financial asset, or are otherwise settled. An estimate of expected credit losses on a financial instrument with off-balance-sheet risk shall be recorded separate from the allowance for credit losses related to a recognized financial instrument.

45-5 An entity may make an accounting policy election, at the class of financing receivable or major security-type level, to present separately on the statement of financial position or within another statement of financial position line item the accrued interest receivable balance, net of the allowance for credit losses (if any). An entity that presents the accrued interest receivable balance, net of the allowance for credit losses (if any), within another statement of financial position line item shall apply the disclosure requirements in paragraph 326-20-50-3A.

ASC 326-30

45-1 An entity shall present available-for-sale debt securities on the statement of financial position at fair value. In addition, an entity shall present parenthetically the amortized cost basis and the allowance for credit losses. If for the purposes of identifying and measuring an impairment the applicable accrued interest is excluded from both the fair value and the amortized cost basis of the available-for-sale debt security, an entity may present separately on the statement of financial position or within another statement of financial position line item the accrued interest receivable balance, net of the allowance for credit losses (if any). An entity that presents the accrued interest receivable balance, net of the allowance for credit losses (if any), within another statement of financial position line item shall apply the disclosure requirements in paragraph 326-30-50-3A.

45-2 An entity shall separately present, in the financial statement in which the components of accumulated other comprehensive income are reported, amounts reported therein related to available-for-sale debt securities for which an allowance for credit losses has been recorded.

The presentation requirements in ASU 2016-13 vary on the basis of the type of financial asset. For example, in the statement of financial position, an entity’s presentation of loans and other debt instruments measured at amortized cost, as well as the corresponding allowances for expected credit losses, would differ from the entity’s presentation of AFS debt securities and the corresponding allowances for such losses.

The table below summarizes the presentation requirements of ASU 2016-13.

	Statement of Financial Position
Asset Type	Asset Balance	Allowance for Expected Credit Losses	Income Statement
Financial assets measured at amortized cost, including: Loans. HTM debt securities. Trade and lease receivables.	Presented at amortized cost.	Presented separately from the asset’s amortized cost balance.	Expected credit losses presented as a credit loss expense.
Loan commitments and other off-balance-sheet instruments	N/A, since these are unrecognized financial instruments.	Presented as a liability. Liabilities cannot be included with other allowances for expected credit losses.	Expected credit losses presented as a credit loss expense.1
AFS debt securities	Presented at fair value. Entities must also include the security’s amortized cost parenthetically. Changes in fair value unrelated to credit are presented in OCI.	Presented parenthetically.	Expected credit losses presented as a credit loss expense.

8.1.1 Other Presentation Considerations

8.1.1.1 Changes in the Present Value of Expected Cash Flows

Changes in the present value of expected future cash flows may result from the passage of time or from changes in the timing and amount of the cash flows the entity expects to receive. ASC 326 allows an entity that uses a DCF approach to present a change in the present value of expected future cash flows as an adjustment to credit loss expense (both favorable and unfavorable) or as interest income (only if the change is related to the passage of time). An entity that chooses to present the change as interest income must, in accordance with ASC 326-20-50-12 and ASC 326-30-50-8, disclose that policy decision as well as the amount recorded in interest income that represents the change in present value attributable to the passage of time.

8.1.1.2 Changes in the Fair Value of the Collateral Securing a Collateral-Dependent Financial Asset

ASC 326 requires an entity to present changes (both favorable and unfavorable) in the fair value of the collateral securing a collateral-dependent financial asset as an adjustment to credit loss expense.

8.1.1.3 Accrued Interest

ASU 2016-13 defines “amortized cost basis” as “the amount at which a financing receivable or investment is originated or acquired, adjusted for applicable accrued interest, accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, writeoffs, foreign exchange, and fair value hedge accounting adjustments” (emphasis added). As discussed in Section 4.4.5.1, the ASU’s inclusion of accrued interest in the definition has three significant implications for financial statements with respect to the measurement, presentation, and disclosure of the amortized cost basis and the allowance for credit losses of financial assets:

When measuring an allowance for credit losses on the amortized cost basis of the assets, entities will be required to include an allowance for the accrued interest that applies to those assets.
Entities will have to present the accrued interest amount in the amortized cost basis of the financial assets in the same line item on the balance sheet.
Accrued interest must be included in the disclosures of the amortized cost basis by class of financing receivable and vintage, as required by ASC 326-20-50-5 and 50-6, respectively.

After a discussion of these implications at the June 2018 TRG meeting, the FASB issued ASU 2019-04, which amends the presentation and disclosure requirements of ASC 326 related to accrued interest. Specifically, the ASU states that an entity would be permitted to do the following:

“Make an accounting policy election to present accrued interest receivable balances and the related allowance for credit losses for those accrued interest receivable balances separately from the associated financial assets on the balance sheet. If the accrued interest receivable balances and the related allowance for credit losses [are presented separately from the associated financial assets but] are not presented as a separate line item on the balance sheet, an entity should disclose the amount of accrued interest receivable balances and the related allowance for credit losses and where the balance is presented.”
“Elect a practical expedient to disclose separately the total amount of accrued interest included in the amortized cost basis as a single balance to meet certain disclosure requirements.”
“Make an accounting policy election to write off accrued interest amounts by reversing interest income or recognizing credit loss expense, or a combination of both.”

For more information about the recognition and measurement changes related to accrued interest, see Section 4.4.5.1.

Footnotes

In May 2020, the Federal Reserve System, the FDIC, the National Credit Union Administration, and the OCC issued a final interagency policy statement (revised in April 2023) on allowances for credit losses. The proposal on which the final statement was based stated that “[p]rovisions for credit losses on off-balance-sheet credit exposures are included as part of ‘Other noninterest expense’ in Schedule RI — Income Statement in the Call Report and in ‘Credit Loss Expense — Off-Balance-Sheet Credit Exposures’ in the Statement of Income and Expense in NCUA Call Report Form 5300.” However, the final statement eliminates any reference to the income statement category in which amounts needed to adjust the liability for expected credit losses for off-balance-sheet credit exposures should be reported in the agencies’ regulatory reports. See Section 10.3.2 for more information.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.