PwC is pleased to offer our updated Transfers and servicing of financial assets guide. This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues. The PwC guides should be read in conjunction with the applicable authoritative accounting literature.
Chapters 1 – 5 address the process for determining whether transfers of financial assets should be accounted for as a sale or secured borrowing as well as related accounting. Chapter 6 addresses the servicing of financial assets. Each chapter highlights key aspects of the guidance and includes questions and examples to illustrate its application.
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 chapter or section number. The other PwC guides referred to in this guide, including their abbreviations are:
- Derivatives and hedging (DH)
- Fair value measurements, global edition (FV)
- Financial statement presentation (FSP)
- Financing transactions (FG)
- Loans and Investments (LI)
Summary of significant changes
Following is a summary of the noteworthy revisions to the guide since it was last updated in July 2018. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in September 2020
- Figure TS 1-2 and Figure TS 1-3 were updated to clarify the interaction between the guidance in ASC 610-20 and ASC 860.
Chapter 2, Unit of account and participating interest
- Example TS 2-3 was added to illustrate A/B structures where the assigned loan is not considered an entire financial asset.
- Example TS 2-9 and Example TS 2-10 were added to illustrate the application of the guidance regarding multiple advances in specific fact patterns.
Chapter 3, Control criteria for transfers of financial assets
- Question TS 3-2 was updated to clarify what is considered “normal course representations and warranties” and that they do not constitute a form of continuing involvement that precludes sale accounting.
- TS 184.108.40.206 was added to discuss repurchase financing transactions.
- TS 220.127.116.11 was added to discuss set-off rights.
- Figure TS 3-3 was updated to include the applicable guidance in cases where the transferor have no continuing involvement with the transferred asset.
- TS 18.104.22.168 was added to discuss “third party purchaser” arrangements for CMBS.
Chapter 4, Accounting for transfers that qualify as sales
- Former section TS 4.3 was removed. The accounting for beneficial interests under ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, is included in LI 14.
- TS 4.3 and TS 4.4 were updated to reflect the guidance in ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Chapter 5, Accounting for transfers reported as secured borrowings
- Example TS 5-1 and Example TS 5-3 were updated to reflect the guidance in ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
- Question TS 6-4 was added to clarify the accounting for a servicer that also enters into a subservicing agreement.
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