PROFESSIONAL RESEARCH: FASB CODIFICATION
(a) Transfer of receivables is addressed in FASB ASC 860-10:
Codification String: Broad Transactions > 860 Transfers and
Servicing > 10 Overall > 05 Background >
The predecessor literature can be accessed by clicking on
“Printer-Friendly with sources” and the retrieve the previous
standard at www.fasb.org/st/
The previous statement that addressed transfers of receivables:
Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (September 2000).
(b) The objectives associated with transfers: (FASB ASC 860-10-10)
10-1 An objective in accounting for transfers of financial assets is
for each entity that is a party to the transaction to recognize
only assets it controls and liabilities it has incurred, to
derecognize assets only when control has been
surrendered, and to derecognize liabilities only when they
have been extinguished. For example, if a transferor sells
financial assets it owns and at the same time writes an atthe-money put option (such as a guarantee or recourse
obligation) on those assets, it should recognize the put
obligation in the same manner as would another unrelated
entity that writes an identical put option on assets it never
owned. However, certain agreements to repurchase or
redeem transferred assets maintain effective control over
those assets and should therefore be accounted for
differently than agreements to acquire assets never owned.
PROFESSIONAL RESEARCH: FASB CODIFICATION (Continued)
(c)
Definitions: (Codification String: Broad Transaction > 860
Transfers and Servicing > 10 Overall > 20 Glossary)
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:
a. Selling a receivable
b. Putting a receivable into a securitization trust
c. Posting a receivable as collateral.
A transfer excludes the following:
a. The origination of a receivable
b. Settlement of a receivable
c. The restructuring of a receivable into a security in troubled
debt restructuring.
Recourse
The right of a transferee of receivables to receive payment from
the transferor of those receivables for any of the following:
a. Failure of debtors to pay when due
b. The effects of prepayments
c. Adjustments resulting from defects in the eligibility of the
transferred receivables.
Collateral
Personal or real property in which a security interest has been
given.
PROFESSIONAL RESEARCH: FASB CODIFICATION (Continued)
(d) Other examples (besides recourse and collateral) that qualify as
continuing involvement:
05-4 The following are examples of continuing involvement
discussed in this Topic: (Codification String: Broad
Transactions > 860 Transfers and Servicing > 10 Overall >
05 Background)
a. Recourse
b. Servicing
c. Agreements to reacquire transferred assets
d. Options written or held
e. Pledges of collateral.
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.