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23-2, Accounting and Financial Reporting Considerations Related to Recent Banking-Sector Developments (March 28, 2023)

Financial Reporting Alert 23-2
March 28, 2023
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Accounting and Financial Reporting Considerations Related to Recent Banking-Sector Developments


Bonds created in response to the 2008 financial crisis, which are generally designed to convert from debt into equity if a lender encounters a liquidity problem.
In its March 13, 2023, press release, the FDIC states, “A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank. The bridge bank structure is designed to ‘bridge’ the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution.”
For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”
The SVB and Signature Bank deposits that were uninsured before the failures were subsequently insured according to the March 12, 2023, press release on the FDIC’s Web site.
Independent organizations created by government legislation to maintain stability and public confidence in financial systems.
See Chapter 5 of the Debt Roadmap for discussion of any costs and fees incurred to obtain loan commitments and Section 2.5.4 of this Financial Reporting Alert for noncash financial assets (e.g., loan commitments) received as proceeds in certain arrangements.
The allowance for credit losses on loans recorded on an amortized cost basis should be determined in accordance with ASC 326-20 for entities that have adopted the CECL standard and in accordance with the incurred loss model in ASC 450 for entities that have not.
ASC 855-10-20 defines subsequent events as follows:
Events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. There are two types of subsequent events:
  1. The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (that is, recognized subsequent events).
  2. The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date (that is, nonrecognized subsequent events).
SEC Staff Accounting Bulletin Topic 1.K, “Financial Statements of Acquired Troubled Financial Institutions.”
SEC Regulation S-X, Rule 3-05, “Financial Statements of Businesses Acquired or to Be Acquired.”
ASC 320-10-25-9 states:
In addition to the changes in circumstances listed in paragraph 320-10-25-6(a) through (f), certain other events may cause the entity to sell or transfer a held-to-maturity security without necessarily calling into question (tainting) its intent to hold other debt securities to maturity. Such events must meet all of the following four conditions to avoid tainting its intent to hold other debt securities to maturity in the future:
  1. The event is isolated.
  2. The event is nonrecurring.
  3. The event is unusual for the reporting entity.
  4. The event could not have been reasonably anticipated.
Under ASC 320-10, an entity that has not adopted the CECL guidance must record an other-than-temporary impairment if it (1) intends, or will more likely than not that be required, to sell a security before recovery of its amortized cost basis or (2) does not expect to recover the entire amortized cost basis of the security.
See footnote 12.
See footnote 7.
Core deposit intangibles represent the value of long-term relationships with depositors, since such depositors provide financial institutions with access to capital that may be non-interest-bearing or carry interest rates below the financial institution’s incremental borrowing rate.