Accounting for Interest Income Associated with the
Purchase of Callable Debt Securities

ACCOUNTING STANDARDS UPDATE NO. 2017-08, RECEIVABLES—NONREFUNDABLE FEES AND OTHER COSTS (SUBTOPIC 310-20): PREMIUM AMORTIZATION ON PURCHASED CALLABLE DEBT SECURITIES


Overview


On March 30, 2017 the FASB issued Accounting Standards Update No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The new guidance shortens the amortization period of premiums on certain purchased callable debt securities to the earliest call date. In order to more closely align the accounting for interest income on these securities to expectations incorporated in market pricing.

Effective Dates


For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle.

What Organizations Are Affected by the New Guidance in the Update?


The new guidance affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium).

Additional Information

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