ASU 2014-11: Transfers and Servicing

By: Dan Smeaton

Topic 860—Repurchase-to-Maturity Transactions, Repurchase Financing, and Disclosures

What is the issue?
This issue is being addressed by FASB due to concern that current accounting guidance distinguishes between repurchase agreements that settle at the same time as the maturity of the transferred financial asset and those that settle any time before maturity. Stakeholders noted that no accounting distinctions between different types of repurchase agreements are warranted because in all types of repurchase transactions the transferor in the repurchase agreement retains exposure to the transferred financial assets and obtains important benefits of those assets throughout the term of the transaction.

Who is impacted?
The accounting changes in the amendments will affect all entities that enter into repurchase-to-maturity transactions or repurchase financings. All entities are subject to new disclosure requirements for certain transactions that involve a transfer of a financial asset accounted for as a sale. All entities are also subject to new disclosure requirements for repurchase agreements, securities lending transactions, and repurchase to maturity transactions accounted for as secured borrowings.

When does this ASU go into effect?
The accounting changes to take place due to this accounting update will be effective for public entities in the first interim or annual period beginning after December 15, 2014. For all other entities, the changes will become effective for annual periods beginning after December 15, 2014, and for interim periods beginning after December 15, 2015.

The disclosure requirements for certain transactions accounted for as a sale are required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase to maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. For all other entities, both new disclosures are required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. The disclosures are not, however, required to be presented for comparative periods before the effective date.

Key changes
The amendments in this update change the accounting for repurchase to maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings.

Under current US GAAP, repurchase agreements that mature at the same time as the transferred financial asset, generally are not considered to maintain the transferor’s effective control. If the remaining conditions for de-recognition are satisfied, those transfers of financial assets currently are accounted for as a sale and a forward repurchase agreement. This ASU will change, which affects the current accounting to accounting for as secured borrowings, allows for greater consistency in accounting for those transactions when compared with the accounting treatment for other repurchase agreements.

For more information, see the link to the guidance: https://asc.fasb.org/imageRoot/00/51829200.pdf


PhotoDan is an Audit Senior at Deloitte & Touche LLP, in Charlotte. Dan graduated from Elon University in 2012 and began his career at Deloitte shortly thereafter. He currently serves on the NCACPA’s Accounting & Attestation Committee.