As discussed in ASC 860-20-25-3 and ASC 860-20-30-2, a transferee should account for transfers that qualify for sale accounting by recording all assets obtained (including any participating interest) and liabilities incurred at fair value. However, if the asset is a purchased financial asset with credit deterioration (PCD asset), or if it meets the criteria in ASC 325-40-30-1A, then the transferee should apply the guidance in ASC 326 to determine the initial amortized cost basis (see LI 9).

ASC 860-20-40-3 provides guidance on a transferee’s accounting upon an event in which the transferor regains control over a transferred financial asset.

ASC 860’s derecognition model is intended to yield symmetrical financial reporting results; if the transfer of a financial asset satisfies the conditions for sale accounting, the transferor should derecognize the asset with corresponding recognition by the transferee. Similarly, if a transferor regains control over a transferred asset, the transferor should recognize the asset, with corresponding derecognition by the transferee. In these circumstances, until the transferor reacquires the transferred asset, the parties should each account for the previous transfer as a secured borrowing.