2.5 Summary of Transactions Within and Outside the Scope of ASC 860-10

2.5.1 The Asset

The table below lists certain assets and indicates whether they represent recognized assets that are subject to ASC 860-10. Provided that there is a transfer of a recognized financial asset and the transfer is not subject to an exception in ASC 860-10-15-4, an entity applies ASC 860-10 to determine whether the transfer is accounted for as a sale or a secured borrowing by both the transferor and the transferee. See Section 1.2 for additional background information on certain types of transfers of financial assets.

Table 2-1

Asset	Recognized Asset Within the Scope of ASC 860-10?	Additional Discussion
Loan receivables (e.g., mortgages, outstanding balances on credit cards, commercial loans, and other installment loans)	Yes. Loan receivables are financial assets subject to ASC 860-10.	Section 2.2.2.5 Section 2.2.2.6 Section 2.4.4.3
Loan participations	Yes. Loan participations are financial assets subject to ASC 860-10.	Section 2.3.1
ADC arrangements	It depends. ADC arrangements that are accounted for as loan receivables are financial assets subject to ASC 860-10. ADC arrangements that are accounted for as investments in real estate are not financial assets.	Section 2.2.3.7
Trade and other accounts receivables	Yes. Trade and other accounts receivables are financial assets subject to ASC 860-10.	Section 2.2.2.4.2 Section 2.2.2.5 Section 2.2.2.6
Note receivables	Yes. Note receivables that are classified as assets (rather than as contra equity) are financial assets subject to ASC 860-10.	Section 2.2.2.5 Section 2.2.2.6 Section 2.4.4.1 Section 2.4.4.3
Debt securities	Yes. Debt securities are financial assets subject to ASC 860-10.	Section 2.2.2.5 Section 2.2.2.6
Equity securities, including equity method investments (e.g., common stocks, preferred stocks, general or limited partnership interests)	Yes. Equity securities are financial assets subject to ASC 860-10 unless they represent in-substance nonfinancial assets under ASC 610-20. However, an investment that represents a controlling financial interest in a consolidated subsidiary is generally not within the scope of ASC 860-10.	Section 2.2.5 Section 2.4.3
Short sales	No. Short sales do not involve recognized financial assets.	Section 2.2.2.8
Options or forward contracts to purchase or sell debt or equity securities	Yes. Options or forward contracts to purchase or sell debt or equity securities that are recognized as assets are financial assets subject to ASC 860-10.	Section 2.2.2.2
Options or forward contracts to purchase or sell nonfinancial assets	It depends. Only options or forward contracts to purchase or sell nonfinancial assets that are accounted for as derivative instruments under ASC 815-10 are subject to ASC 860-10.	Section 2.2.2.2 Section 2.2.3.2
Beneficial interests in securitized assets (whether the securitized assets are financial or nonfinancial assets)	Yes. Beneficial interests in securitized financial assets are financial assets subject to ASC 860-10, regardless of whether the underlying securitized assets are financial assets or nonfinancial assets. If the investor in the beneficial interests consolidates the securitization entity, it should consider whether a transfer of those beneficial interests represents a transfer of financial assets in substance.	Section 2.2.5.3 Section 2.4.3
Negotiable instruments such as certificates of deposit and banker’s acceptances	Yes. Negotiable instruments such as certificates of deposits and drafts related to banker’s acceptances are financial assets subject to ASC 860-10.	Section 2.3.4
Insurance contracts — insured party	It depends. Insurance contracts that permit the insurer to settle a claim by either making a cash payment or providing goods or services do not meet the definition of financial assets. Insurance contracts that require a cash payment if the insured event occurs meet the definition of financial assets. However, only amounts recognized by an insured party may represent financial assets subject to ASC 860-10.	Section 2.2.2.7.2
Insurance contracts — insurance entity	It depends. Generally, only earned premiums receivable represent financial assets subject to ASC 860-10.	Section 2.2.2.7.3
Sales-type and direct financing lease receivables	Yes. Receivables under sales-type and financing leases, which include residual values guaranteed at lease commencement represent financial assets subject to ASC 860-10. However, neither unguaranteed residual values nor residual values guaranteed after lease commencement are financial assets.	Section 2.2.3.5
Operating leases	No. Lease payments receivable under operating leases are not recognized financial assets.	Section 2.2.2.3
Rights to future revenues	No. Rights to future revenues are not recognized financial assets. ASC 470-10 addresses sales of future revenues.	Section 2.2.2.4.1
Contract assets	No. Contract assets are not recognized financial assets.	Section 2.2.2.4.2
Servicing assets	No. Servicing assets are not financial assets subject to ASC 860-10. ASC 860-50 addresses transfers of servicing assets.	Section 2.2.3.1 Chapter 6
Nonderivative financial assets	Yes. Although not financial assets, ASC 860-10-15-5 states that transfers of nonfinancial derivative assets are subject to ASC 860-10.	Section 2.2.3.2
Regulatory assets	No. Regulatory assets are not financial assets.	Section 2.2.3.3
Litigation judgments	It depends. Litigation judgments are not recognized financial assets unless a judgment is enforceable by a government or court of law and has been contractually reduced to a fixed payment schedule.	Section 2.2.3.4
Taxes receivable	No. Receivables arising from taxes are not financial assets.	Section 2.2.3.6
Treasury stock	No. Treasury stock is recognized as a contra-equity account and is not a financial asset.	Section 2.4.4.1

2.5.2 Application of the Term “Transfer”

The table below discusses whether certain transactions involving financial assets represent transfers under ASC 860-10. Transfers of recognized financial assets are subject to ASC 860-10 unless an exception in ASC 860-10-15-4 applies. See Section 1.2 for additional background information on certain types of transfers of financial assets.

Table 2-2

Transaction Involves	Transfer Within the Scope of ASC 860-10?	Additional Discussion
The origination of a loan receivable	No. The origination of a loan receivable does not meet the definition of a transfer in ASC 860-10.	Section 2.1.3
A loan syndication	No. Loan syndications involve the origination of loan receivables to participating lenders. In a loan syndication, the lead bank does not transfer the loans that are originated by other participating banks.	Section 2.3.1
The settlement of an obligation	No. A conveyance of a noncash financial asset to the holder of a loan or other receivable in full or partial settlement of that obligation does not meet the definition of a transfer in ASC 860-10. Nevertheless, application of ASC 860-10 is still often relevant to whether derecognition of the financial asset is appropriate.	Section 2.3.1 Section 2.3.2
A legal defeasance of debt	Yes. A conveyance of financial assets to a defeasance trust meets the definition of a transfer in ASC 860-10.	Section 2.3.2
A repurchase agreement or securities lending	It depends. The conveyance of an existing financial asset as part of a repurchase agreement or securities lending transaction meets the definition of a transfer in ASC 860-10. However, dollar-roll repurchase transactions for which the underlying securities being sold do not yet exist or are to be announced are outside the scope of ASC 860-10 because those transactions do not arise in connection with recognized financial assets.	Section 2.3.3
A banker’s acceptance	It depends. The origination or settlement of a banker’s acceptance does not meet the definition of a transfer in ASC 860-10. However, the following meet this definition: A vendor transfers its draft receivable from the bank to a third party. A bank transfers its receivable from the customer to a third party.	Section 2.3.4
A wash sale	Yes. The sale of a financial asset in a wash sale meets ASC 860-10’s definition of a transfer.	Section 2.3.5
A desecuritization	Yes. ASC 860-10-40-5 applies to desecuritizations.	Section 2.3.6

2.5.3 Transfers Not Subject to ASC 860-10

The table below discusses certain transfers that are not within the scope of ASC 860-10 even if the transaction involves recognized financial assets.

Table 2-3

Transaction Involves	ASC 860-10 Reference	Additional Discussion
The custody of financial assets for safekeeping	ASC 860-10-15-4(c)	Section 2.4.1
A contribution	ASC 860-10-15-4(d)	Section 2.4.2
An ownership interest in a consolidated subsidiary unless (1) the transfer involves financial assets in substance or (2) the investor accounts for the interest at fair value in accordance with industry-specific accounting guidance	ASC 860-10-55-13	Section 2.4.3
An investment by an owner or a distribution to an owner of a business entity	ASC 860-10-15-4(f)	Section 2.4.4
Certain lease transactions	ASC 860-10-15-4(h) and (i)	Section 2.4.6

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