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PwC is pleased to offer our updated Loans and investments guide. This guide is intended to help our clients and other interested parties implement and apply the applicable accounting and reporting standards.
This guide discusses the accounting for loans and investments, including the recognition of interest income and impairment. This guide also discusses the accounting for loans and investments purchased with credit deterioration, modification or restructuring of a loan (including troubled debt restructuring), loan foreclosures, and sales of real estate.
The FASB has issued two standards, as amended, that address the accounting for financial instruments, ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities and ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The FASB has subsequently issued amendments that clarify the guidance introduced by ASU 2016-01 and ASU 2016-13.
This guide assumes that ASU 2016-13 (and its subsequent amendments) has been adopted. Although some significant aspects of the accounting for loans and investments have changed as a result of ASU 2016-01 and ASU 2016-13 (for example, the accounting for equity securities and the accounting for impairments of loans and securities), much of the accounting for these instruments remains the same.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification. It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
  • Consolidation (CG)
  • Equity method investments and joint ventures (EM)
  • Derivatives and hedging (DH)
  • Fair value measurements (FV)
  • Financial statement presentation (FSP)
  • Financing transactions (FG)
  • Foreign currency guide (FX)
  • Insurance contracts (IG)
  • Property, plant, equipment and other assets (PPE)
  • Reference rate reform (REF)
  • Revenue from contracts with customers (RR)
  • Transfers and servicing of financial assets (TS)
Summary of significant changes
The following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions to guide made in October 2021
LI 2, Accounting for equity investments
  • LI 2.2 was updated to include examples on determining the classification of a contingently redeemable preferred stock investment as a debt security or equity instrument.
  • LI 2.3.2 was updated to include discussion on the accounting implications of certain subsequent events impacting equity interests measured using the measurement alternative.
LI 7, Current expected credit losses
  • LI 7.5.1 was updated to discuss whether loan commitments acquired in a business combination are in the scope of the CECL impairment model.
Revisions to guide made in June 2021
LI 4, Accounting for loans
  • LI 4.10 was updated to include guidance on acquisition, development, and construction lending arrangements.

LI 7, Current expected credit losses
  • LI 7.3.3.3 was updated to discuss whether a provision for credit losses can be recorded as reduction of interest income.

LI 12, Presentation and disclosure
  • LI 12.7.1 was updated to discuss whether the vintage disclosures required by ASC 326-20-50-6 are required in interim financial statements

LI 14, Beneficial interests
  • LI 14.6.4 was updated to discuss whether PCD accounting should be applied to a beneficial interest recognized at fair value with changes in fair value recorded in earnings.

Revisions to guide made in March 2021
LI 13, Effective date and transition
  • Several sections of LI 13 were removed as a result of the adoption of ASU 2016-01 by all reporting entities.

Copyrights
This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.
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