ASC 325-40 is an integrated interest income and impairment model for beneficial interests classified as held to maturity (HTM), available for sale (AFS), or trading. For the purposes of impairment, while ASC 325-40 is broadly based on the guidance in ASC 326-20 for HTM securities (i.e., CECL model), and ASC 326-30 for AFS securities (i.e., AFS impairment model), but it has some notable differences. ASC 325-40 provides specific requirements in applying ASC 326-20 and ASC 326-30. ASC 325-40 requires changes in either the timing or amount of cash flows to be reflected as an adjustment to the allowance for credit losses in applying ASC 326-20 and ASC 326-30. In addition, when applying ASC 326-20 to a beneficial interest subject to ASC 325-40, the use of a discounted cash flow method is required to measure expected credit losses.
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