4.2 Recognition of a Sale of Financial Assets

4.2.1 Derecognition of Assets Sold and Recognition of Proceeds

4.2.1.1 General

ASC 860-20

25-1 Section 860-20-40 provides derecognition guidance a transferor (seller) applies upon completion of a transfer of financial assets that satisfies paragraph 860-10-40-5’s conditions to be accounted for as a sale. Upon completion of such a transfer, the transferor (seller) shall also recognize any assets obtained or liabilities incurred in the sale, including, but not limited to, any of the following:

Cash
Servicing assets
Servicing liabilities
In a sale of an entire financial asset or a group of entire financial assets, any of the following:
1. The transferor’s beneficial interest in the transferred financial assets
2. Put or call options held or written (for example, guarantee or recourse obligations)
3. Forward commitments (for example, commitments to deliver additional receivables during the revolving periods of some securitizations)
4. Swaps (for example, provisions that convert interest rates from fixed to variable).

See Examples 1, 2, and 5 (paragraphs 860-20-55-43 through 55-59) for illustration of this guidance.

25-3 The transferee shall recognize all assets obtained (including any participating interest(s) obtained) and any liabilities incurred.

Assets Obtained and Liabilities Incurred as Proceeds

25-4 The proceeds from a sale of financial assets consist of the cash and any other assets obtained, including beneficial interests and separately recognized servicing assets, in the transfer less any liabilities incurred, including separately recognized servicing liabilities. Any asset obtained is part of the proceeds from the sale. Any liability incurred, even if it is related to the transferred financial assets, is a reduction of the proceeds. Any derivative financial instrument entered into concurrently with a transfer of financial assets is either an asset obtained or a liability incurred and part of the proceeds received in the transfer.

30-1 The transferor shall initially measure at fair value any asset obtained (or liability incurred) and recognized under paragraph 860-20-25-1.

30-2 The transferee shall initially measure, at fair value, any asset or liability recognized under paragraph 860-20-25-3.

Pending Content (Transition Guidance: ASC 326-10-65-1)

30-2 The transferee shall initially measure, at fair value, any asset or liability recognized under paragraph 860-20-25-3, unless it is a purchased financial asset with credit deterioration or is a beneficial interest that meets the criteria in paragraph 325-40-30-1A, in which case the transferee shall apply the guidance in Topic 326 on measurement of credit losses to determine the initial amortized cost basis.

Sale of a Participating Interest

40-1A Upon completion of a transfer of a participating interest that satisfies the conditions in paragraph 860-10-40-5 to be accounted for as a sale, the transferor (seller) shall:

Allocate the previous carrying amount of the entire financial asset between both of the following on the basis of their relative fair values at the date of the transfer:
1. The participating interest(s) sold
2. The participating interest that continues to be held by the transferor.
Derecognize the participating interest(s) sold
Apply the guidance in paragraphs 860-20-25-1 and 860-20-30-1 on recognition and measurement of assets obtained and liabilities incurred in the sale
Recognize in earnings any gain or loss on the sale
Report any participating interest(s) that continue to be held by the transferor as the difference between the following amounts measured at the date of the transfer:
1. The previous carrying amount of the entire financial asset
2. The amount derecognized.

Pending Content (Transition Guidance: ASC 815-20-65-6)

40-1A Upon completion of a transfer of a participating interest that satisfies the conditions in paragraph 860-10-40-5 to be accounted for as a sale, the transferor (seller) shall:

Allocate the previous carrying amount of the entire financial asset between both of the following on the basis of their relative fair values at the date of the transfer:
1. The participating interest(s) sold
2. The participating interest that continues to be held by the transferor.
Derecognize the participating interest(s) sold
Apply the guidance in paragraphs 860-20-25-1 and 860-20-30-1 on recognition and measurement of assets obtained and liabilities incurred in the sale
Recognize in earnings any gain or loss on the sale
Report any participating interest(s) that continue to be held by the transferor as the difference between the following amounts measured at the date of the transfer:
1. The previous carrying amount of the entire financial asset
2. The amount derecognized.

For the transfer of a participating interest in a financial asset included in a closed portfolio hedged in an existing portfolio layer method hedge in accordance with Topic 815 on derivatives and hedging, when applying the guidance in (a) through (e) an entity shall not include any portion of the hedge basis adjustment that is maintained on the closed portfolio basis in accordance with paragraphs 815-20-25-12A(b) and 815-25-35-1(c).

Sale of an Entire Financial Asset or Group of Entire Financial Assets

40-1B Upon completion of a transfer of an entire financial asset or a group of entire financial assets that satisfies the conditions in paragraph 860-10-40-5 to be accounted for as a sale, the transferor (seller) shall:

Derecognize the transferred financial assets
Apply the guidance in paragraphs 860-20-25-1 and 860-20-30-1 on recognition and measurement of assets obtained and liabilities incurred in the sale
Recognize in earnings any gain or loss on the sale

Pending Content (Transition Guidance: ASC 815-20-65-6)

Derecognize the transferred financial assets
Apply the guidance in paragraphs 860-20-25-1 and 860-20-30-1 on recognition and measurement of assets obtained and liabilities incurred in the sale
Recognize in earnings any gain or loss on the sale

If the transferred financial asset was accounted for under Topic 320 as available for sale before the transfer, item (a) requires that the amount in other comprehensive income be recognized in earnings at the date of transfer. If the transferred financial asset was included in a closed portfolio hedged in an existing portfolio layer method hedge in accordance with Topic 815 before the transfer, when applying the guidance in (a) through (c) an entity shall not include any portion of the hedge basis adjustment that is maintained on the closed portfolio basis in accordance with paragraphs 815-20-25-12A(b) and 815-25-35-1(c).

A transferor accounts for a sale of financial assets by derecognizing the carrying amounts of the transferred financial assets and recognizing the fair value of all assets obtained or liabilities incurred in the sale. Any difference between the carrying amount of the financial assets derecognized and the net proceeds received in the sale (i.e., the fair value of the assets obtained less the fair value of any liabilities incurred) is recognized in earnings as a gain or loss on sale. Special consideration is required when a transfer involves the sale of a participating interest. In such a transfer, the transferor must allocate the previous carrying amount of the entire financial asset between the participating interest sold and the interest that continues to be held by the transferor in accordance with ASC 860-10-40-1A.

Although ASC 860-20-25-1 and ASC 860-20-25-4 discuss types of assets obtained and liabilities incurred, these are only examples. ASC 860-20 requires that all assets obtained and all liabilities incurred (regardless of their nature or form) be recognized by the transferor in a sale and initially measured at fair value. The following are examples of assets that may be received and liabilities that may be incurred in a transfer that meets the conditions for sale accounting:1

Servicing assets or liabilities (see Chapter 6).
Beneficial interests in securitized financial assets, including IO strips in transferred financial assets (see Section 4.4.3).
Contingently exercisable or settleable repurchase features.
ROAPs.
Cleanup call options (see Section 4.3.1.3).
Call and put options.
Forward commitments to transfer additional financial assets (see Section 4.4.8).
Derivative assets or liabilities.
Credit enhancements, guarantees, and other recourse obligations to the transferee (see Section 4.4.2).

These assets obtained and liabilities incurred must be recognized at fair value as part of sale accounting for the transferred financial assets. They must be classified and subsequently measured in accordance with other applicable U.S. GAAP (e.g., ASC 320 for debt securities, ASC 325-40 for beneficial interests in securitized financial assets, ASC 815-10 for derivatives, ASC 860-50 for servicing assets and liabilities). See Section 4.4 for discussion of the classification and subsequent measurement of assets obtained and liabilities assumed in a sale of financial assets.

A transferee recognizes all assets obtained and all liabilities incurred at fair value in accordance with ASC 860-20-30-2. Such assets and liabilities are classified and subsequently measured in accordance with other applicable U.S. GAAP. For entities that have adopted ASU 2016-01, the guidance on purchased credit-deteriorated assets in ASC 326-20 may apply. Section 4.4.9 discusses the accounting for acquired credit card receivables. If a transferee has a nonderivative option to acquire securities that will be within the scope of ASC 320 and that option contract has all the characteristics in ASC 815-10-15-141 (i.e., an instrument within the scope of the “Certain Contracts on Debt and Equity” subsections of ASC 815-10), the subsequent-measurement guidance in ASC 815-10-35-5 will apply. Under ASC 815-10-35-5, if such an option expires as worthless and the transferee subsequently purchases the same debt security in the market, the purchased debt security must be recorded at its market price plus the remaining unamortized premium related to the expired option, if any.

4.2.1.2 Trade-Date Versus Settlement-Date Accounting

4.2.1.2.1 General

ASC 860-20

25-2 Although a transfer of securities may not be considered to have reached completion until the settlement date, this Subtopic does not modify other generally accepted accounting principles (GAAP) that require accounting at the trade date for certain contracts to purchase or sell securities.

4.2.1.2.2 Transferor’s Accounting

The transferor’s accounting for sales of financial assets on a trade-date or settlement-date basis depends on the type of financial asset sold and certain industry practices. Except for certain sales of securities and sales of derivative instruments, entities generally recognize sales of financial assets, including those sold in securitization transactions, on a settlement-date basis. For example, settlement-date accounting is generally applied to sales of loan receivables by financial services entities.

In certain industries, sales involving regular-way security trades (and certain other regular-way trades of financial assets) are recognized on a trade-date basis. For example, broker-dealers (see ASC 940-320- 25-1), depository and lending entities (see ASC 942-325-25-2), investment companies (ASC 946-320- 25-1), and defined benefit and defined contribution plans (see ASC 960-325-25-1 and ASC 962-325-25-1) are required to apply trade-date accounting to sales of securities on a regular-way basis. If the basis for recognizing security sales is not specifically addressed in U.S. GAAP, entities can elect an accounting policy. However, no entity should apply trade-date accounting to a sale of a security that is not made on a regular-way basis or if there are any conditions before closing that have not been met. In addition, there may be industry-prescribed exceptions for certain transactions (e.g., ASC 946-320-25-2 and 25-3 address private placements and tender offers).

Sales of derivative instruments are generally accounted for on the trade date by all entities.

4.2.1.2.3 Transferee’s Accounting

The transferee’s accounting for purchases of financial assets on a trade-date or settlement-date basis depends on the type of financial asset purchased and certain industry practices. Except for certain purchases of securities and purchases of derivative instruments, entities generally recognize purchases of financial assets on a settlement-date basis. For example, settlement-date accounting is generally applied to purchases of loan receivables by financial services entities.

In certain industries, purchases involving regular-way security trades (and certain other regular-way trades of financial assets) are recognized on a trade-date basis. For example, broker-dealers (see ASC 940-320-25-1), depository and lending entities (see ASC 942-325-25-2), investment companies (ASC 946-320-25-1), and defined benefit and defined contribution plans (see ASC 960-325-25-1 and ASC 962-325-25-1) are required to apply trade-date accounting to purchases of securities on a regular-way basis. If the basis for recognizing security purchases is not specifically addressed in U.S. GAAP, entities can elect an accounting policy. However, no entity should apply trade-date accounting to a purchase of a security that is not made on a regular-way basis or if there are any conditions before closing that have not been met. In addition, there may be industry-prescribed exceptions for certain transactions (e.g., ASC 946-320-25-2 and 25-3 address private placements and tender offers).

Purchases of derivative instruments are generally accounted for on the trade date by all entities.

4.2.1.3 Transaction Costs

4.2.1.3.1 General

ASC 860-20

Transaction Costs

35-10 Transaction costs relating to a sale of the receivables may be recognized over the initial and reinvestment periods in a rational and systematic manner unless the transaction results in a loss. Transaction costs for a past sale are not an asset and thus are part of the gain or loss on sale. In a credit card securitization, however, some of the transaction costs incurred at the outset relate to the future sales that are to occur during the revolving period, and thus can qualify as an asset.

4.2.1.3.2 Transferor’s Accounting

Transaction costs incurred in a sale of financial assets (including those sold in securitization transactions) that represent costs incurred in a single transaction should be treated as a reduction of the proceeds of the transfer (i.e., they factor into the gain or loss on sale). There is no basis for capitalizing transaction costs in a sale of financial assets unless the transfer involves a securitization structure that features ongoing, multiple sales (e.g., a revolving-period securitization). In these situations, ASC 860-20-35-10 indicates that “[t]ransaction costs . . . may be recognized over the initial and reinvestment periods in a rational and systematic manner unless the transaction results in a loss.” If a loss is incurred on the initial transfer or on contractually expected transfers, however, third-party transaction costs should be expensed as incurred. See Section 4.4.8 for further discussion of revolving-period securitizations.

If a transferor obtains assets other than cash as proceeds in a sale of financial assets, those noncash assets should be recognized at fair value in accordance with ASC 860-20-30-1. Similarly, liabilities incurred in conjunction with a sale of financial assets are also initially measured at fair value in accordance with ASC 860-20-30-1. The initial measurement of those assets and liabilities should not include any transaction costs incurred in the sale because ASC 820 indicates that transaction costs are not an attribute of the fair value of an asset or liability and, as stated above, transaction costs reduce the net proceeds received and factor into the gain or loss on sale.

The accounting above does not apply to transactions that are accounted for as secured borrowings. See Section 5.2.5 for discussion of the accounting for transaction costs associated with secured borrowings.

4.2.1.3.3 Transferee’s Accounting

Entities should consider other Codification topics in accounting for transaction costs incurred in a purchase of financial assets. Although transaction costs are recognized in earnings as incurred for purchased financial assets that are subsequently measured at fair value through earnings, immediate recognition of transaction costs in earnings may not be appropriate when the investor subsequently measures a purchased financial asset by using an attribute other than fair value through earnings. For example, when a debt security is classified as held to maturity (i.e., accounted for subsequently at amortized cost), it is appropriate to capitalize transaction costs as part of the cost of the asset.

Furthermore, some Codification topics require subsequent recognition of a financial asset at fair value less costs to sell (i.e., the subsequent measurement of the asset is reduced by the anticipated costs of selling the asset). Thus, both the transaction costs incurred to acquire the financial asset and those that will be incurred to sell the financial asset may be recognized in earnings while the entity owns the asset. The subsections below discuss other Codification topics (not all-inclusive) that address the accounting for transaction costs incurred to purchase financial assets.

4.2.1.3.3.1 Debt Securities

Under ASC 320, an entity may classify investments in debt securities as held to maturity, available for sale, or trading. The table below discusses the accounting for transaction costs incurred when a debt security is acquired.

Table 4-1

Accounting for Transaction Costs Incurred in Connection With Acquiring a Debt Security
Classification of Security	Accounting for Transaction Costs
Held to maturity	Capitalized. In accordance with ASC 310-20-15-2 and 15-3, nonrefundable fees and costs associated with acquiring debt securities classified as held to maturity are within the scope of ASC 310-20. ASC 310-20-30-5 states that the “initial investment in a purchased loan or group of loans shall include the amount paid to the seller plus any fees paid or less any fees received.” Because transaction costs associated with the acquisition of held-to-maturity debt securities are within the scope of ASC 320, fees paid to a third party that are directly related to the acquisition (e.g., brokerage fees paid to a broker-dealer) would be capitalized as part of the original carrying amount. In accordance with ASC 310-20, entities should separately expense any other costs incurred in connection with acquiring securities (e.g., internal costs, portfolio management fees, investment consultation, or due diligence costs paid to an adviser). Held-to-maturity debt securities are subsequently measured at amortized cost and are subject to evaluation for impairment.
Available for sale	Capitalized initially. In accordance with ASC 310-20-15-2 and 15-3, nonrefundable fees and costs associated with acquiring debt securities classified as available for sale are within the scope of ASC 310-20. ASC 310-20-30-5 states that the “initial investment in a purchased loan or group of loans shall include the amount paid to the seller plus any fees paid or less any fees received.” Because transaction costs associated with the acquisition of available-for-sale debt securities are within the scope of ASC 320, fees paid to a third party that are directly related to the acquisition (e.g., brokerage fees paid to a broker-dealer) would be capitalized as part of the original carrying amount. In accordance with ASC 310-20, entities should separately expense any other costs incurred in connection with acquiring securities (e.g., internal costs, portfolio management fees, investment consultation, or due diligence costs paid to an adviser). An entity must subsequently measure debt securities classified as available for sale at fair value, with changes in fair value recognized in OCI (provided that there is no impairment). This fair value should not include any transaction costs because ASC 820 indicates that such costs are not a characteristic of an asset or liability measured at fair value. Therefore, entities will immediately recognize an unrealized loss in OCI after the purchase of a debt security classified as available for sale. Given the security’s classification as available for sale, such a loss will be reported in AOCI unless the security is subsequently impaired and measured at fair value on the basis of the entity’s conclusion that it is more likely than not that the security will be sold or that there is an intent to sell it.
Trading	Expensed as incurred. ASC 820 indicates that transaction costs are not a characteristic of an asset or liability measured at fair value. ASC 310-20-15-3(c) states that ASC 310-20 does not apply to securities that are subsequently measured at fair value through earnings.

4.2.1.3.3.2 Equity Securities

Unless the measurement alternative in ASC 321-10-35-2 is applied or the investment qualifies for the equity method of accounting, investments in equity securities must be initially and subsequently recognized at fair value, with changes in fair value reported in earnings. Since transaction costs are not a characteristic of an asset measured at fair value (see ASC 820-10-35-9B), unless the measurement alternative in ASC 321-10-35-2 is elected, transaction costs incurred to acquire an equity security are immediately expensed. See Example 4-2.

ASC 321-10-35-2 indicates that when the measurement alternative is applied to an equity security without a readily determinable fair value, that security is measured at “cost minus impairment, if any,” and adjustments are also made for “observable price changes in orderly transactions for the identical or a similar investment of the same issuer.” Thus, securities measured according to this alternative are initially measured at the transaction price, which includes incremental direct costs related to acquiring the security (i.e., transaction costs). However, these capitalized transaction costs would be subsequently expensed in earnings upon (1) a remeasurement event under ASC 321, including an impairment or an observable price decline (which represent fair value measurements under ASC 820); (2) a sale of the security; or (3) a reclassification of the security to fair value through earnings.

Equity method investments are generally initially measured on a cost accumulation basis, which would include transaction costs. However, there are exceptions to this general principle. ASC 323-10-30-2 addresses two situations in which an equity method investment is initially recognized at fair value. In these circumstances, the initial measurement should not include any transaction costs.

4.2.1.3.3.3 Investment Securities Owned by an Investment Company

ASC 946-320-35-1 states that “[a]n investment company shall measure investments in debt and equity securities subsequently at fair value.” In addition, ASC 946-320-30-1 states that “[a]n investment company shall initially measure its investments in debt and equity securities at their transaction price. The transaction price shall include commissions and other charges that are part of the purchase transaction.” According to this guidance, investment companies initially recognize investments in debt and equity securities at the transaction price, including related commissions and other direct costs incurred in connection with acquisition of the securities (i.e., an entry price and not fair value), and subsequently measure the investments at fair value under ASC 820. If any other potential differences between entry and exit prices are ignored, the capitalization of transaction costs into the initial measurement of investment securities by investment companies will result in a loss on initial recognition. For example, assume that Mutual Fund X purchases a publicly traded equity security for $99 immediately before the market closing (the fair value is therefore also $99). Further assume that X incurred a $1 commission in purchasing the security. Under ASC 946, the initial cost basis is $100 ($99 plus the $1 transaction cost). The fair value would be $99; therefore, a $1 loss would be recognized on the acquisition date. This loss on initial recognition is presented as a “net unrealized appreciation (depreciation) on investments” rather than as a separate expense in the investment company’s statement of operations.

Some have questioned whether ASC 820’s exit price notion and guidance indicating that transaction costs are not a characteristic of an asset measured at fair value conflict with the guidance in ASC 946-320-30-1. The implication is that investment companies would not be permitted to present transaction costs as part of the net change in unrealized appreciation (depreciation) on investments. However, we believe that investment companies that apply ASC 946 should present commissions and other charges that are directly related to the acquisition of investment securities in the net change in unrealized appreciation (depreciation) on investments. ASC 820-10-35-9B states, in part, “[t]ransaction costs shall be accounted for in accordance with other Topics.” ASC 946-320-30-1 specifies that the initial amount recorded for investment purchases “shall include commissions and other charges that are part of the purchase transaction.” ASC 820 does not affect this guidance. Accordingly, ASC 946 continues to require investment companies to include commissions and other charges incurred as part of securities purchase transactions in the net change in unrealized appreciation (depreciation) on investments. After initial recognition, an investment company measures its investment at the exit price in accordance with ASC 820. The difference between the initial recognized amount and subsequent fair value measurement would be presented as a “net unrealized appreciation (depreciation) on investments” rather than as a separate expense in the statement of operations.

4.2.1.3.3.4 Plan Assets of Pension and Other Postretirement Benefit Plans

The fair value measurement of investments held by a pension or other postretirement plan should be reduced by the costs of disposing of the assets. ASC 715-30-35-50 states, in part:

The fair value of an investment shall be reduced by brokerage commissions and other costs normally incurred in a sale if those costs are significant (similar to fair value less cost to sell).

4.2.1.3.3.5 Financial Assets Measured at the Lower of Cost or Fair Value

Certain Codification topics require that financial assets be measured at the lower of cost or fair value. Those Codification topics specify whether the fair value measurement should be reduced for transaction costs. For example, under ASC 310-10-35-48, nonmortgage loans classified as HFS must be reported at the lower of amortized cost or fair value. ASC 310-10-35-48 does not indicate that fair value should be reduced for anticipated costs to sell. Conversely, under ASC 310-10-35-23 (or ASC 326-20-35-4 for entities that have adopted ASU 2016-13), when an HFI-classified loan receivable is measured for impairment on the basis of the fair value of the collateral and repayment of the loan depends on the sale of the collateral, impairment measurement must be based on fair value less costs to sell.

4.2.2 Examples

The following two examples in ASC 860-20 illustrate the initial measurement of proceeds and other liabilities in a transfer of financial assets that meets the conditions for sale accounting:

ASC 860-20

Example 1: Recording Transfers With Proceeds of Cash, Derivative Instruments, and Other Liabilities

55-43 This Example illustrates the guidance in paragraphs 860-20-25-1 and 860-20-30-1. Entity A transfers entire loans with a carrying amount of $1,000 to an unconsolidated securitization entity and receives proceeds with a fair value of $1,030, and the transfer is accounted for as a sale. Entity A undertakes no obligation to service and assumes a limited recourse obligation to repurchase delinquent loans. Entity A agrees to provide the transferee a return at a variable rate of interest even though the contractual terms of the loan are fixed rate in nature (that provision is effectively an interest rate swap).

55-44 This Example has the following assumptions.

55-45 The following journal entry is made by Entity A.

Example 2: Recording Transfers of Participating Interests

55-46 This Example illustrates the guidance in paragraph 860-20-25-1. This Example assumes the conditions for a sale in paragraph 860-10-40-5 are met. Entity B transfers a nine-tenths participating interest in a loan with a fair value of $1,100 and a carrying amount of $1,000, and the transfer is accounted for as a sale. The servicing contract has a fair value of zero because Entity B estimates that the benefits of servicing are just adequate to compensate it for its servicing responsibilities.

55-47 This Example has the following assumptions.

55-48 The following journal entry is made by Entity B.

Below is another example illustrating initial recognition in a securitization transaction accounted for as a sale.

Example 4-1

Securitization With Servicing Rights Retained

Entity A transfers mortgage loans to an SPE that issues beneficial interests to third parties. Entity A retains an IO strip and will continue to service the transferred loans. The details of the transaction, as well as the calculation and journal entries associated with the transfer, are shown below. For simplicity, this example excludes (1) consideration of the need for a two-step transfer, as discussed in ASC 860-10-55-22 and 55-23, and (2) an evaluation of the IO strip under ASC 815.

The following example illustrates the transferee’s accounting for transaction costs incurred in the purchase of equity securities:

Example 4-2

Acquisition of Equity Security Subsequently Accounted for at Fair Value

An entity acquires an investment in an exchange-traded equity security on December 31, 20X7. The asset will be accounted for at fair value through earnings on a recurring basis in accordance with ASC 321. The entity paid $100 for the security (which was also the security’s closing price), plus a $1 broker commission, for a total transaction price of $101. The entity transacted in its principal market for the security. However, in accordance with ASC 820-10-30-3A(c), the entity determines that the transaction price does not represent fair value at initial recognition because of the transaction costs. The closing price on December 31, 20X7, is $100. If A were to subsequently sell the security, it would incur a $1 broker commission.

The fair value of the security as of the December 31, 20X7, reporting date is the security’s $100 closing price. Since ASC 321 does not indicate otherwise, the entity should record a $1 expense for the broker commission paid to acquire the security. The broker commission is not a characteristic of the security and does not add value to it. Transaction costs are a separate unit of account and therefore do not enter into the fair value measurement of the security. The $1 broker commission indicates that the transaction price of $101 is not fair value at inception. Another market participant would not reimburse the entity for the broker commission; instead, it would pay the entity the closing market price of $100 for the security. In a manner consistent with ASC 820-10-35-9B and Example 4 in ASC 820-10-55-42 through 55-45A, the entity should not adjust the security for the $1 broker commission it would incur to sell the security. In other words, the entity should not write down the security to $99 (the net proceeds it would receive upon selling the security).

Footnotes

In this list, it is assumed that sale accounting is not precluded for the assets and liabilities.

Confidential and Proprietary — for Use Solely by Authorized Personnel

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.