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Available-for-sale (AFS) debt securities are not within the scope of the current expected credit loss (CECL) model. ASC 326-30 provides a different impairment model that is a modified version of the other-than-temporary impairment (OTTI) model prescribed by prior GAAP. The recognition and measurement of impairment will differ between the CECL model and the AFS debt security impairment model.
The AFS debt security impairment model retains much of the prior OTTI model. Like the prior OTTI model, an AFS debt security is impaired if its fair value is below its amortized cost basis. Also retained are the requirements to consider whether a reporting entity intends to sell a security or will more likely than not be required to sell a security before recovery of its amortized cost basis. The new AFS debt security model differs from the prior OTTI model in that it no longer allows consideration of the length of time during which the fair value has been less than its amortized cost basis when determining whether a credit loss exists. The concept of OTTI is no longer relevant under ASC 326-30.
This chapter discusses the application of the AFS debt security impairment model in accordance with ASC 326-30. Figure LI 8-1 illustrates where additional information on AFS debt securities can be found within this guide.
Figure LI 8-1
Location of additional information on AFS debt securities
Topic
Location of discussion in guide
Classification of AFS debt securities
Application of the AFS impairment model to purchased financial assets with more than insignificant credit deterioration
Presentation and disclosure requirements
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