1.1 General
ASC 860-10
05-1 The Transfers and
Servicing Topic establishes accounting and reporting
standards for transfers and servicing of financial assets.
It also establishes the accounting for transfers of
servicing rights.
05-2 The Transfers and
Servicing Topic includes the following five Subtopics:
- Overall
- Sales of Financial Assets
- Secured Borrowings and Collateral
- Subparagraph superseded by Accounting Standards Update No. 2009-16.
- Servicing Assets and Liabilities.
Transfers of Financial Assets
05-3 This Subtopic,
together with the other Subtopics within this Topic,
provides accounting and reporting standards for transfers
and servicing of financial assets. It also addresses
transfers of servicing rights.
05-4 Accounting for
transfers in which the transferor has no continuing
involvement with the transferred financial assets or with
the transferee has not been controversial. However,
transfers of financial assets often occur in which the
transferor has some continuing involvement either with the
assets transferred or with the transferee. Examples of
continuing involvement with the transferred financial assets
include, but are not limited to, any of the following:
a. Servicing arrangements
aa. Recourse arrangements
aaa. Guarantee arrangements
b. Subparagraph superseded by Accounting Standards
Update No. 2009-16.
c. Agreements to purchase or redeem transferred
financial assets
d. Options written or held
dd. Derivative financial instruments that are
entered into contemporaneously with, or in
contemplation of, the transfer
ddd. Arrangements to provide financial
support
e. Pledges of collateral
f. The transferor’s beneficial interests in the
transferred financial assets.
Transfers of financial assets with continuing involvement
raise issues about the circumstances under which the
transfers should be considered as sales of all or part of
the assets or as secured borrowings and about how
transferors and transferees should account for sales and
secured borrowings. This Topic establishes standards for
resolving those issues.
05-5 Sales and other
transfers may result in a disaggregation of financial assets
and liabilities into components, which become separate
assets and liabilities. This Subtopic provides guidance on
accounting for such transfers and provides consistent
standards for distinguishing transfers of financial assets
that are sales from transfers that are secured
borrowings
ASC Master Glossary
Financial Asset
Cash, evidence of an ownership interest in an entity, or a
contract that conveys to one entity a right to do either of
the following:
- Receive cash or another financial instrument from a second entity
- Exchange other financial instruments on potentially favorable terms with the second entity.
Servicing Assets
A contract to service financial assets under which the
benefits of servicing are expected to more than adequately
compensate the servicer for performing the servicing. A
servicing contract is either:
- Undertaken in conjunction with selling or securitizing the financial assets being serviced
- Purchased or assumed separately.
Servicing Liabilities
A contract to service financial assets under which the
estimated future revenues from contractually specified
servicing fees, late charges, and other ancillary revenues
(benefits of servicing) are not expected to adequately
compensate the servicer for performing the servicing.
Transfer
The conveyance of a noncash financial asset by and to someone
other than the issuer of that financial asset.
A transfer includes the following:
- Selling a receivable
- Putting a receivable into a securitization trust
- Posting a receivable as collateral.
A transfer excludes the following:
- The origination of a receivable
- Settlement of a receivable
- The restructuring of a receivable into a security in a troubled debt restructuring.
Transferee
An entity that receives a financial asset, an interest in a
financial asset, or a group of financial assets from a
transferor.
Transferor
An entity that transfers a financial asset, an interest in a
financial asset, or a group of financial assets that it
controls to another entity.
ASC 860 contains accounting and disclosure guidance on transfers of
(1) financial assets and (2) rights to service financial assets. With respect to
such transfers, ASC 860 addresses the accounting by both the transferor (e.g., the
entity that transfers financial assets) and the transferee (e.g., the entity that
receives financial assets). A transfer of financial assets or the rights to service
financial assets is accounted for as either a sale or a secured borrowing. The
accounting conclusion depends on the terms and conditions of the transfer, including
the nature of any continuing involvement of the transferor. The complexity of the
accounting analysis depends on the complexity of the transaction. The accounting as
a sale or secured borrowing is symmetrical. That is, if the transferor meets the
conditions to account for a transfer of financial assets or rights to service
financial assets as a sale and therefore derecognizes the transferred financial
assets or rights to service financial assets, the transferee accounts for the
transfer as a purchase of financial assets or rights to service financial assets.
Similarly, if the transferor does not meet the conditions to account for a transfer
of financial assets or rights to service financial assets as a sale and reflects the
transfer as a secured borrowing (i.e., it does not derecognize the financial assets
or rights to service financial assets), the transferee accounts for the transfer as
a receivable from the transferor. ASC 860 provides guidance addressing the initial
and subsequent measurement by both transferors and transferees; the measurement
guidance an entity applies depends on whether the transfer is accounted for as a
sale or a secured borrowing.
ASC 860 also addresses the accounting and disclosure by entities that service
financial assets. The accounting for servicing assets and servicing liabilities
differs depending on whether those assets or liabilities are subsequently accounted
for at amortized cost or at fair value. The guidance in ASC 860 on the accounting
and disclosures related to servicing assets and servicing liabilities applies
regardless of whether such contracts are (1) entered into as part of a transfer that
meets the conditions for sale accounting or (2) purchased or assumed separately.
This Roadmap addresses the accounting and disclosure guidance on
transfers of financial assets or rights to service financial assets, as well as the
accounting for servicing assets and servicing liabilities. Chapter 7 contains a table
comparing the guidance on transfers of serving assets under U.S. GAAP with that
under IFRS® Accounting Standards.