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9.6 Debt security disclosure requirements
Publication date: 13 Nov 2019
us Financial statement presentation guide
ASC 320-10-50 provides disclosure guidance related to investments in debt securities. Generally, the disclosures are required to be segregated by security accounting classification (i.e., trading, available-for-sale [AFS], or held-to-maturity [HTM]), and highlight key information to investors about the types and terms of securities held.
Additional disclosures could be required for securities measured at fair value (see FSP 20.3).
9.6.1 Major security types
Many investments disclosures, including those required for securities classified as AFS or HTM, are required to be provided by major security type. ASC 320-10-50-1B provides guidance to help reporting entities evaluate the level at which the disclosures should be provided. It requires reporting entities to consider whether the discussion of certain security types should be further disaggregated based on common characteristics underlying the securities (e.g., geographic concentration, credit quality, economic characteristics). For example, a reporting entity that separates AFS debt securities into government bonds and mortgage-backed securities may want to consider whether further detail would be beneficial to investors. If so, the reporting entity may consider separating government bonds between US and foreign, or separating mortgage-backed securities into commercial and residential.
Figure FSP 9-3, Figure FSP 9-4, Figure FSP 9-5, Figure FSP 9-6, Figure FSP 9-7, and Figure FSP 9-8 include sample disclosures that present debt securities disaggregated into three major security types. These are only examples; the level of disaggregation will vary by reporting entity and the nature of its portfolio.
9.6.2 Disclosures for securities classified as AFS
When disclosing debt securities classified as AFS in accordance with ASC 320-10-50-2, a reporting entity should disclose the following information by major security type for the securities held as of the date of each balance sheet presented.
- Amortized cost basis
- Aggregate fair value
- Total other-than-temporary impairment recognized in accumulated other comprehensive income (AOCI)
- Total gains for securities with net gains in AOCI
- Total losses for securities with net losses in AOCI
Figure FSP 9-3 illustrates an example disclosure for AFS securities in accordance with ASC 320-10-50-2. It includes example classes of instruments.
Figure FSP 9-3
Sample AFS disclosure of amortized cost basis, fair value, and total OTTI information
Sample AFS disclosure of amortized cost basis, fair value, and total OTTI information
Note X: Investments
The following table summarizes the unrealized positions for available-for-sale fixed-maturity debt securities, disaggregated by class of instrument.
Single year depicted for simplicity.
Amortized cost basis |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
Total OTTI in AOCI
|
|
US Treasury securities |
$500 |
$50 |
$3 |
$547 |
$0 |
Foreign government bonds |
780 |
10 |
30 |
760 |
5 |
Asset-backed securities |
20 |
17 |
7 |
30 |
6 |
Total fixed maturities |
$1,300 |
$77 |
$40 |
$1,337 |
$11 |
9.6.2.1 Reclassifications out of AOCI for AFS securities
For each income statement presented, ASC 320-10-50-9 requires a reporting entity to disclose the change in net unrealized holding gain or loss on AFS securities reported in AOCI during the period and the amount of gains and losses reclassified out of OCI into net income upon sale of the securities through a "Realized gain/loss" line in the income statement. ASC 220-10-45-17 requires reporting entities to disclose the location in the income statement to which amounts were reclassified from AOCI. FSP 4.5.5.1 includes a sample disclosure.
These required disclosures can either be shown as part of the statement of changes in equity or in a footnote.
9.6.3 Disclosures for securities classified as HTM
When disclosing securities classified as HTM in accordance with ASC 320-10-50-5, a reporting entity should disclose the following information by major security type, as of each balance sheet date presented.
- Amortized cost basis
- Aggregate fair value (PBEs only)
- Gross unrecognized holding gains (PBEs only)
- Gross unrecognized holding losses (PBEs only)
- Net carrying amount
- Total other-than-temporary impairment recognized in accumulated other comprehensive income
- Gross gains and losses in AOCI for any derivatives that hedged the forecasted acquisition of the HTM securities
Figure FSP 9-4 provides an example of a disclosure for HTM securities in accordance with ASC 320-10-50-5.
Figure FSP 9-4
Sample disclosure—HTM amortized cost and fair value information
Sample disclosure—HTM amortized cost and fair value information
Assume the reporting entity does not have amounts previously recognized in AOCI associated with these HTM securities (ASC 320-10-50-5(dd)) and the net carrying amount (ASC 320-10-50-5(d)) is presented on the face of the balance sheet.
Single year depicted for simplicity.
Note X—Investments (continued)
The following table summarizes the unrealized positions for held-to-maturity securities, disaggregated by class of instrument.
Amortized cost basis |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
|
US Treasury securities |
$410 |
$67 |
$13 |
$464 |
Foreign government bonds |
280 |
28 |
30 |
278 |
Asset-backed securities |
90 |
11 |
14 |
87 |
Total |
$780 |
$106 |
$57 |
$829 |
9.6.4 Disclosures for AFS and HTM securities classified by maturity date
In addition to the disclosures in FSP 9.6.2 and FSP 9.6.3, ASC 320-10-50-3 and ASC 320-10-50-5 require presentation of investments in AFS and HTM securities, respectively, by maturity date. This disclosure should include the fair value and net carrying amount (if different than the fair value). The disaggregation by contractual maturity illustrated in Figure FSP 9-5 (i.e., due within one year, due after one year through five years, etc.) is the minimum level of disaggregation required by ASC 942-320 for depository and lending institutions. All other reporting entities may use judgment to determine the level of disaggregation.
The fair value and net carrying value for debt securities that do not have a single maturity date, such as mortgage-backed securities, may be disclosed separate from those included in the aging groupings. Alternatively, if a reporting entity chooses to allocate such securities across the aging categories, it should disclose the basis for allocation.
Figure FSP 9-5 illustrates an example of a single disclosure for AFS and HTM securities.
Figure FSP 9-5
Sample disclosure—AFS and HTM securities grouping by contractual maturity
Sample disclosure—AFS and HTM securities grouping by contractual maturity
Note X—Investments (continued)
The following table summarizes the fair value and amortized cost bases of the available-for-sale and held-to-maturity securities by contractual maturity.
Single year depicted for simplicity.
Available-for-sale |
Held-to-maturity |
||||
Amortized cost basis |
Fair value |
Amortized cost basis |
Fair value |
||
Due within one year |
$434 |
$429 |
$117 |
$121 |
|
Due after one year through five years |
235 |
241 |
78 |
92 |
|
Due after five years through ten years |
213 |
211 |
289 |
306 |
|
Due after ten years |
398 |
426 |
206 |
223 |
|
Asset-backed securities |
20 |
30 |
90 |
87 |
|
Total |
$1,300 |
$1,337 |
$780 |
$829 |
|
Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations.
9.6.5 Disclosure of impairments of securities
ASC 320-10-50-6 through ASC 320-10-50-8B outline the quantitative and qualitative disclosure requirements for reporting entities with impaired securities, including those with OTTI.
9.6.5.1 Investments in an unrealized loss position – quantitative disclosures
For all investments in an unrealized loss position for which an OTTI has not been recognized in net income, including investments for which a portion of an OTTI has been recognized in OCI, a reporting entity should disclose both of the following, aggregated by major security type as of each balance sheet date (in a tabular format).
- Aggregate related fair value of investments with unrealized losses
- Aggregate amount of unrealized losses (the amount by which amortized cost basis exceeds fair value)
Reporting entities should segregate these amounts by those investments in a continuous unrealized loss position for (1) less than 12 months and (2) 12 months or longer.
Figure FSP 9-6 illustrates an example of a disclosure of the length of time individual securities have been in a continuous unrealized loss position.
Figure FSP 9-6
Sample disclosure—length of time individual securities have been in a continuous unrealized loss position, aggregated by major security type
Sample disclosure—length of time individual securities have been in a continuous unrealized loss position, aggregated by major security type
Note X—Investments (continued)
The following table summarizes the fair value and gross unrealized losses aggregated by category and the length of time that individual securities have been in a continuous unrealized loss position.
Single year depicted for simplicity.
Less than twelve months |
Greater than twelve months |
Total |
||||||
Fair value |
Gross unrealized loss |
Fair value |
Gross unrealized loss |
Fair value |
Gross unrealized loss |
|||
US Treasury securities |
$687 |
$16 |
$324 |
$— |
$1,011 |
$16 |
||
Foreign government bonds |
608 |
29 |
430 |
31 |
1,038 |
60 |
||
Asset-backed securities |
30 |
14 |
87 |
7 |
117 |
21 |
||
Total debt securities |
$1,325 |
$59 |
$841 |
$38 |
$2,166 1 |
$97 2 |
||
2Represents the sum of the (1) gross unrealized losses on HTM securities of $57 (per Figure FSP 9-4) and (2) the gross unrealized losses on AFS securities of $40 (per Figure FSP 9-3).
When a portion of an OTTI is not recognized in net income (i.e., it is recognized in OCI), the duration of that unrealized loss is measured using the balance sheet date of the reporting period in which the OTTI was first recognized in OCI as the starting reference point. Continuous unrealized loss positions stop when either of the following happens.The reporting entity recognizes an OTTI in net income for the total amount by which amortized cost basis exceeds fair value.The fair value of the security equals or exceeds the amortized cost basis of the investment.
9.6.5.2 Investments in an unrealized loss position—qualitative disclosures
As discussed in ASC 320-10-50-6(b), as of the latest balance sheet date, a reporting entity should include a narrative disclosure that allows a user to understand the information (both positive and negative) the reporting entity considered in reaching its conclusion as to why an impairment was not deemed other-than-temporary. The reporting entity may aggregate the disclosure by investment category, unless there are individually significant unrealized losses. ASC 320 outlines examples of the information reporting entities should consider including in this qualitative disclosure.
Excerpt from ASC 320-10-50-6(b)
This disclosure could include all of the following:
- The nature of the investment(s)
- The cause(s) of the impairment(s)
- The number of investment positions that are in an unrealized loss position
- The severity and duration of the impairment(s)
- Other evidence considered by the investor in reaching its conclusion that the investment is not other-than-temporarily impaired, including, for example, any of the following:
i. Performance indicators of the underlying assets in the security, including any of the following:
01. Default rates
02. Delinquency rates
03. Percentage of nonperforming assets.
ii. Loan-to-collateral-value ratios
iii. Third-party guarantees
iv. Current levels of subordination
v. Vintage
vi. Geographic concentration
vii. Industry analyst reports
viii. Sector credit ratings
ix. Volatility of the security’s fair value
x. Any other information that the investor considers relevant.
ASC 320-10-55-23 provides a detailed narrative disclosure that illustrates some of these points. In certain examples in that illustration, the entity has securities in unrealized loss positions that it concludes are not other-than-temporarily impaired. As a result, the entity discloses it does not intend to sell the securities nor does it believe it is more likely than not it will be required to sell them before recovery of their amortized cost basis. Reporting entities should then consider what additional information is necessary to achieve the objective of the disclosure. For example, a reporting entity with asset-backed securities with more significant unrealized losses might elaborate and describe its assessment process, considering the performance indicators noted in paragraph 5.i of ASC 310-10-50-6.
9.6.5.3 Credit losses recognized in net income
For both interim and annual reporting periods in which an OTTI of a debt security is recognized and only the credit loss is recognized in net income, a reporting entity should disclose by major security type the methodology and significant inputs used to measure the amount related to the credit loss. Examples of significant inputs are included in ASC 320-10-50-8A and are similar to those described in ASC 320-10-50-6.
As discussed in ASC 320-10-50-8B, a reporting entity should disclose a tabular rollforward of the amount related to credit losses recognized in net income. This rollforward is meant to provide investors with additional information regarding management’s expectations of credit losses, how those expectations develop over time, and how actual experience compares to prior expectations.
The cumulative balance being rolled forward is not an actual financial statement account balance. Rather, it represents a memo account relating to the cumulative credit loss activity recorded in income on impaired debt securities for which a portion of the impairment was recorded in OCI. One of the focus areas for stakeholders is the disclosure of additional credit losses recognized on securities for which a credit loss had previously been recognized (item e in ASC 320-10-50-8B) because this provides some indication of management's ability to accurately estimate credit losses on a timely basis.
Subsequent increases in expected cash flows on a previously other-than-temporarily impaired debt security (ASC 320-10-50-8B(f)) are recognized as a yield adjustment on a prospective basis. We believe the intent of the FASB was to require disclosure in the rollforward of the amount recognized in net income in the current period that relates to the expected increase in cash flows. However, the components of the rollforward are identified as "minimum" disclosures, suggesting supplemental disclosure of the entire increase in expected cash flows is not precluded. Similarly, supplemental disclosure of the accretion of discounted expected cash flows recognized in the period is not precluded.
Figure FSP 9-7 illustrates the rollforward of credit losses recognized in net income for which a portion was recognized in OCI.
Figure FSP 9-7
Sample disclosure—the rollforward of credit losses recognized in net income on fixed-maturity securities
Sample disclosure—the rollforward of credit losses recognized in net income on fixed-maturity securities
Note X—Investments (continued)
The following table summarizes the credit loss recognized in earnings on fixed-maturity securities for which a portion of the OTTI was recognized in OCI.
Single year depicted for simplicity.
Balance, beginning of year |
$129 |
a |
Credit losses for which OTTI was not previously recognized |
31 |
b |
Credit-impaired securities disposed of for which there was no prior intent or requirement to sell |
(48) |
c |
Credit-impaired securities not disposed of for which there was no prior intent or requirement to sell |
12 |
d |
Credit impairments on previously impaired securities |
19 |
e |
Accretion recognized due to changes in cash flows expected to be collected over the remaining expected term |
(12) |
f |
Increases due to the passage of time |
3 |
f |
Balance, end of year |
$134 |
g |
9.6.6 Sales, transfers, and related matters
Additional disclosures are required when investments in available-for-sale debt securities are sold during a period or transferred between classifications (e.g., from AFS to HTM), as outlined in ASC 320-10-50-9 through ASC 320-10-50-13.
For each period for which an income statement is presented, ASC 320-10-50-9 requires the following disclosures for AFS securities.
- Proceeds from sales and maturities
- Gross realized gains and losses
- The basis on which the cost of a security sold or the amount reclassified out of AOCI into income was determined (e.g., specific identification, average cost, or other method)
- The amount of the net unrealized holding gain or loss for the period included in AOCI
- The amount of gains and losses reclassified out of AOCI into income for the period
ASC 320-10-50-9 also requires disclosure of trading gains and losses on trading securities still held at the balance sheet date.
Figure FSP 9-8 illustrates the disclosure of the proceeds from sales or maturities and the gross realized gains and losses. FSP 4.5 details the disclosure requirements associated with the amounts in, and reclassified out of, AOCI.
Figure FSP 9-8
Example disclosure of the proceeds and gross realized gains and losses from sales or maturities of AFS securities
Example disclosure of the proceeds and gross realized gains and losses from sales or maturities of AFS securities
Note X: Investments (continued)
The following table summarizes the proceeds and gross realized gains and losses from sales or maturities of AFS securities.
[For example purposes, only a single year is shown.]
Gross realized gains |
Gross realized losses |
Gross proceeds from sales |
Gross proceeds from maturities |
|
Fixed-maturity AFS securities |
$314 |
$149 |
$2,100 |
$300 |
The gross proceeds from sales and maturities may alternatively be presented on the face of the statement of cash flows.
For any sales of, or transfers from, securities classified as HTM, a reporting entity should disclose the items required by ASC 320-10-50-10 in the notes for each period for which an income statement is presented.
Excerpt from ASC 320-10-50-10
- The net carrying amount of the sold or transferred security
- The net gain or loss in accumulated other comprehensive income for any derivative that hedged the forecasted acquisition of the held-to-maturity security
- The related realized or unrealized gain or loss
- The circumstances leading to the decision to sell or transfer the security. (Such sales or transfers should be rare, except for sales and transfers due to the changes in circumstances identified in paragraph ASC 320-10-25-6(a) through (f).)
According to ASC 320-10-35-16, the fair value at the date of the transfer, adjusted for subsequent amortization, becomes the amortized cost basis of the security transferred to HTM for the disclosures required by ASC 320.
Although ASC 320-10-35-12 states transfers of securities from AFS to trading should be rare, ASC 320-10-50-9(c) requires the reporting entity to disclose the gross gains and gross losses included in income from the transfer.
9.6.7 Options that do not qualify for derivative accounting
As discussed in ASC 320-10-55-5, when a reporting entity enters into forward contracts or options that (1) are not derivatives subject to ASC 815 and (2) involve the acquisition of securities that will be accounted for under ASC 320, it should report those contracts consistent with the accounting, presentation, and disclosure requirements of ASC 320.
ASC 815-10-50-9 requires the reporting entity to disclose its accounting policy for the premium paid to acquire such options that are classified as held-to-maturity or available-for-sale.
9.6.8 Beneficial interests in securitized financial assets
A reporting entity may own debt securities representing beneficial interests in securitized financial assets that have been accounted for as sales. In these situations, in addition to meeting the disclosure requirements of ASC 320, the reporting entity should consider the disclosure requirements in ASC 860-20-50-4. See FSP 22 for additional information on transfers.
As discussed in ASC 325-40-45-1, the amount of accretable yield on beneficial interests in securitized financial assets may not be displayed on the balance sheet.
1 Represents the amount of OTTI in AOCI that was not included in net income. Amount excludes unrealized gains on impaired AFS securities relating to changes in their value subsequent to the impairment measurement date.
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