-1A requires the following disclosures about collateral:
- The reporting entity’s policy for requiring collateral or other security in repurchase agreements and securities lending transactions
- As of the latest balance sheet date presented, the carrying amount and classification of assets pledged as collateral that are not reclassified and separately reported on the balance sheet, and associated liabilities
- As of the latest balance sheet date presented, qualitative information about the relationship between the pledged assets and associated liabilities (e.g., restrictions on the use of the collateral pledged to secure certain obligations)
- With respect to collateral the reporting entity is permitted to sell or repledge:
- The fair value of the collateral and the fair value of any portion sold or repledged for each balance sheet presented
- Information about the sources and uses of the collateral
(b) also requires registrants to provide information about assets mortgaged, pledged, or otherwise subject to lien, and identify the obligations collateralized for the most recent balance sheet filed. This information may appear on the face of the balance sheet or in the footnotes.
Figure FSP 22-5 illustrates a sample disclosure of accounting and reporting policies relating to repurchase (resale) agreements and securities lending (borrowing) transactions, accompanied by a discussion of its policies regarding related collateral. For simplicity, this sample disclosure omits any required comparative amounts.
Figure FSP 22-5
Sample disclosure—summary of significant accounting policies: repurchase and securities lending transactions and related collateral arrangements
This sample disclosure illustrates the application of certain of the requirements in ASC 860-30-50-1A.
Note X—Summary of Significant Accounting Policies
Securities Financing Arrangements
Securities purchased under agreements to resell and securities sold under agreements to repurchase are reported as financing transactions, and thus the related receivables and payables are presented in the accompanying balance sheets at the amounts at which the securities subsequently will be resold or reacquired as specified in the respective agreements. Such amounts include accrued interest. Receivables and payables arising from these agreements are offset in the balance sheet when permitted under applicable accounting standards. It is the Company’s policy to take possession of securities purchased under agreements to resell. On a daily basis, the Company monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest, and requests additional collateral as necessary. The Company’s agreements with third parties specify their rights to request additional collateral. All collateral is held by the Company or a custodian.
Securities borrowed and securities loaned transactions also are reported as financing transactions, and thus the related receivable and payables are carried at the amounts of cash advanced and received, respectively, plus accrued interest. The Company measures the fair value of the securities borrowed and loaned against the cash collateral on a daily basis. Additional cash collateral is obtained as necessary to ensure such transactions are adequately collateralized. The Company’s agreements with third parties specify their rights to request additional collateral. All collateral is held by the Company or a custodian. It is the Company’s policy to accept only cash collateral in connection with these transactions.
For certain resale agreements and securities-borrowed transactions, securities received qualify for recognition on the balance sheet, in which case they are recorded at fair value, along with a corresponding obligation to return them. Cash collateral received in connection with repurchase agreements and securities-lending arrangements is recorded on the Company’s balance sheet, along with the related obligation to reacquire the securities. Securities sold under repurchase agreements and securities loaned that the transferee-borrower may sell or repledge are reclassified and reported separately on the accompanying balance sheet.