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Off-balance sheet credit risk refers to the credit risk related to off-balance sheet loan commitments, standby letters of credit, certain financial guarantees, and other similar instruments (except for derivative instruments).

23.7.1 Off-balance-sheet credit risk

ASC 942-825, Financial Services—Depository and Lending, requires the following disclosures for financial instruments with off-balance-sheet credit risk (except for those instruments in the scope of ASC 815, Derivatives and Hedging):

Excerpt from ASC 942-825-50-1

  1. The face or contract amount
  2. The nature and terms, including, at a minimum, a discussion of the:
    1. Credit and market risk of those instruments
    2. Cash requirements of those instruments
    3. Related accounting policy
  3. The entity's policy for requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments.

In addition to the disclosure requirements discussed above, a reporting entity should evaluate whether there are credit losses related to these instruments. If the conditions of ASC 450-20 are met, a liability for the credit loss on these instruments should be recognized and reported separately from the allowance for loan and lease losses.
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