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Many securitization transactions involve the transfer of financial assets to a securitization entity, often a special purpose entity, through one or multiple steps. The securitization entity issues various interests that entitle its holders to the cash flows generated by the entity’s financial assets. These interests are commonly referred to as “beneficial interests” in those assets.
Certain beneficial interests in securitizations (that are not derivatives within the scope of ASC 815) are either debt securities under ASC 320 or are required to be accounted for like debt securities under ASC 320. These beneficial interests can be classified as trading, AFS, or HTM debt securities. Additionally, ASC 325-40 provides guidance on interest income, initial measurement, and subsequent measurement for certain beneficial interests within its scope.
Refer to LI 14 for further information on accounting for AFS beneficial interests that are within the scope of ASC 325-40.
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