Transfers and Servicing: Repurchase Agreements and Similar Transactions
Last updated on March 14, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Updated sections are indicated with an asterisk *)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
Due Process Documents
*Decisions Reached at Last Meeting
*Summary of Decisions Reached to Date
*Board/Other Public Meeting Dates
The objective of this project is to improve the existing accounting and disclosure guidance on repurchase agreements and other transactions involving a transfer and a forward agreement to repurchase the transferred assets at a fixed price from the transferee to address application issues and changes in the marketplace and to ensure that investors obtain useful information about these transactions.
Due Process DocumentsOn January 15, 2013, the Financial Accounting Standards Board issued proposed Accounting Standards Update, Transfers and Servicing (Topic 860)—Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings. Read the summary of feedback received on the proposed Accounting Standards update.
- Download the Proposed Update—Transfers and Servicing (Topic 860): Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings
- Read the comment letters on the proposed Accounting Standards Update
- Read the news release introducing the proposed Accounting Standards Update
- Read the FASB In Focus which summarizes the proposed Accounting Standards Update
- Listen to a podcast in which FASB Member Russ Golden discusses the proposed Accounting Standards Update
- Download the Proposed XBRL Taxonomy Exposure Draft—ASU
The Board discussed the feedback received on the external review draft of the Accounting Standards Update, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Agreements, Repurchase Financings, and Disclosures.
The Board decided to modify the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings as follows to address operability concerns raised by external reviewers:
- Remove the component of the disclosure related to reporting the fair value of the collateral pledged as of the reporting date
- Remove the component of the disclosure related to reporting the remaining contractual maturity of the collateral pledged
- Remove the requirement to integrate the disaggregation by class of collateral pledged with the requirement to disclose the tenor of the financing agreement.
December 18, 2013
The Board continued redeliberations of its January 2013 Exposure Draft, Transfers and Servicing (Topic 860): Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings (“proposed Update”). The Board discussed the feedback received in limited outreach meetings on its tentative decisions reached during redeliberation.
Accounting for Repurchase-to-Maturity Transactions
The Board affirmed its proposal in the proposed Update that a repurchase-to-maturity transaction on a held-to-maturity security would not taint an entity’s held-to-maturity portfolio.
Substantially-the-Same Criterion for Effective Control
After considering feedback received related to determining whether a transfer of an existing mortgage-backed security and a forward repurchase of a To Be Announced (TBA) security are substantially the same, the Board decided to not move forward with implementation guidance based on the presence of trade stipulations. In addition, the Board decided to make no changes to the guidance on substantially the same as part of this project. The Board decided that it would consider whether to pursue any amendments to substantially the same separately from this project.
Disclosures: Transfers of Financial Assets Accounted for as a Sale (Set 1)
At the October 2, 2013 Board meeting, the Board decided to require new disclosures for transactions that comprise a transfer of financial assets to a transferee and an agreement done in contemplation of the initial transfer with the same transferee that results in the transferor retaining substantially all of the exposure to the return of the transferred financial asset throughout the term of the transaction. The Board decided to require disclosure of the following information necessary to understand the nature of the transactions, the transferor’s continuing exposure to the transferred financial assets, and the presentation of the components of the transaction in the financial statements:
- The carrying amounts of assets derecognized as of the date of the initial transfer in transactions for which an agreement with the transferee remains outstanding at the reporting date, by type of transaction (for example, repurchase agreement, securities lending, sale and total return swap, and so forth). If the amounts have changed significantly from prior periods or are not representative of the activity throughout the period, a discussion of the reasons for the change should be disclosed.
- Information about the transferor’s ongoing exposure to the transferred financial assets by type of transaction
- A description of the arrangements that result in the transferor retaining exposure to the transferred financial assets by type of transaction
- The risks related to the transferred financial assets to which the transferor continues to be exposed after the transfer
- As of the reporting date, the following amounts to provide users of financial statements with information about the reporting entity’s maximum exposure to financial assets that are not recognized in its statement of financial position:
- The fair value of assets derecognized by the transferor for transactions described in paragraph (1) by type of transaction
- Amounts recorded in the statement of financial position arising from the transaction by type of transaction in paragraph (1), for example, the carrying value or fair value of forward repurchase agreements or swap contracts. To the extent these amounts are captured in the derivative disclosure requirements under paragraph 815-10-50-4B, an entity should provide a cross-reference to the appropriate line item in the disclosure.
Disclosures: Asset Quality Disclosures (Set 2)
At the October 2, 2013 Board meeting, the Board discussed new requirements to disclose information about the asset quality of transferred financial assets to provide financial statement users with an understanding of the risks inherent in the transferred financial assets. The disclosures discussed by the Board would have required separate presentation of the following information for transfers of financial assets for which an agreement with the transferee remains outstanding at the balance sheet date that are accounted for as both sales and secured borrowings, by type of transaction:
- A disaggregation of the gross proceeds/gross obligation arising from the transaction by the class of financial assets that were transferred in accordance with paragraph 820-10-50-2B
- The fair value of the financial assets transferred for each class of financial assets
- Weighted-average contractual duration for each class of financial assets
- A qualitative discussion of any obligation arising from a decline in the fair value of the transferred financial assets.
At today’s meeting, the Board decided to require the disclosure of asset quality information described in items (1)-(4) above; however, the Board decided to limit the scope of the disclosure to repurchase agreements and securities lending transactions that are accounted for as secured borrowings only. Additionally, the Board tentatively decided to require disclosure of the tenor (maturity profile) of the agreement.
Transition Method, Effective Date, and Early Adoption
The Board discussed transition methods and affirmed its previous decision to require a cumulative-effect approach for all changes in accounting. The Board also affirmed its previous decision not to require additional transition disclosures beyond those that are already required by Topic 250, Accounting Changes and Error Corrections.
The Board decided that for public business entities, the changes would be effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. For all other entities, the changes would be effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015.
The Board decided not to allow early adoption for a public business entity. However, the Board decided that an entity other than a public business entity may elect to apply the requirements for interims periods beginning after December 15, 2014, as required for a public business entity.
The Board directed the staff to continue drafting a final Accounting Standards Update for vote by written ballot. Please see the Current Technical Plan for more information about the project timeline.
*Board/Other Public Meeting Dates
The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
|*March 12, 2014||Board Meeting—Discussion of the issues that have arisen during the drafting of the forthcoming Accounting Standards update on Repurchase-to-Maturity Agreements, Repurchase Financings, and Disclosures.|
|December 18, 2013||Board Meeting—Discussion of the feedback received from the limited outreach meetings held on the tentative redeliberated decisions of the January 2013 Exposure Draft.|
|October 2, 2013||Board Meeting—Discussion of its tentative decisions, accounting for repurchase financings, the substantially-the-same characteristics for effective control, a disclosure package, and transition.|
|May 23, 2013||Board Meeting—Feedback received from comment letters on proposed Accounting Standards Update and the next steps for the project|
|December 12, 2012||Board Meeting—Held-to-maturity securities transferred in a repurchase agreement that settles at the maturity of the transferred securities|
|November 7, 2012||Board Meeting—Complexity, permission to ballot, transition and comment period for a proposed Accounting Standards Update|
|October 3, 2012||Board Meeting—Accounting repurchase financings and types of transfers with repurchase agreements requiring secured borrowing accounting|
|September 5, 2012||Board Meeting—Disclosure for certain repurchase agreements and other transfers with forward agreements to repurchase transferred assets|
|August 1, 2012||Board Meeting—Accounting for repurchase agreements that involve similar but not identical financial assets and agreements that do not meet the criteria for secured borrowing accounting|
|June 27, 2012||Board Meeting—Accounting for repurchase agreements involving identical financial assets|
|March 21, 2012||Board Meeting—Agenda decision announcement|
FASB Accounting Standards Codification® Topic 860, Transfers and Servicing, provides the guidance for making the determination for whether transfers of financial assets under repurchase agreements meet the criteria for secured borrowing accounting or sale accounting. These transactions are evaluated to determine which party has control over the financial assets. The assessment of these transactions typically rests on whether the transferor has “effective control” over the transferred financial assets.
In April 2011, the FASB issued Accounting Standards Update No. 2011-03, which amended Topic 860. The Update removed the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, as well as the collateral maintenance implementation guidance related to that criterion. The new requirements are effective for interim or annual periods beginning on or after December 15, 2011.
Contact InformationNga Zimmerman
Assistant Project Manager
FASB Project Consultant
Postgraduate Technical Assistant
David M. Shaw
XBRL Assistant Project Manager