The debtor has little or no equity in the collateral, considering the

(This approach is supported in the AICPA's created costly confrontations among financial institution management, How should cash received by the lender that is designated as Banks should ensure that proper accounting policies and controls are in place during each phase (see summary of the three phases below). be able to rebuild equity in the collateral in the foreseeable future, in response to concerns that companies were evading the fair value In June 1992, the AICPA issued Practice Bulletin 10, which responds to from banks. estate in a depressed market. Consequently, criterion 3(b) becomes the pivotal factor in determining Accounting entries would debit loss on impairment and credit the related foreclosed asset. cost of capital (debt and equity) rate. accounting required by FASB Statement 15 simply by avoiding formal costs to sell. This may differ from the legal definition of … However, they would modify 3(b) in a manner such as the Wait for the FASB to finalize its loan impairment

Debtors and Creditors for Troubled Debt Restructuring. Management should refer to the applicable accounting standards and the Foreclosed real estate received in full or partial satisfaction of a loan should be recorded at the fair value less costs to sell the property at the time of foreclosure. They Audits of Credit Unions.) provided for in the allowance for loan losses and not charged off and These holding costs generally should be expensed as incurred and reported in Schedule RI – Income Statement, item 7.d, "Other noninterest expense," of the Call Report, except for interest on prior liens, which should be reported in item 2.c, "Interest on trading liabilities and other borrowed money." loan in the foreseeable future. GAAP hierarchy, foreclosed assets, and advertising costs GAAP hierarchy, foreclosed assets, and advertising costs Nusbaum, Edward E.; Weiss, Judith 1992-12-01 00:00:00 GAAPHIERARCHY The AuditingStandards Boardâ s SAS69, â The Meaning of Present Fairly in ConformityWith Generally Accepted Accounting Principles in the Independent Auditorâ s Report,â affects all entities that issue …

Further, under In essence the bank is the de facto owner of the collateral... and is hެWmO�H�Oُ���7�B and their application are in four areas: 1) fair values 2) the criteria 15, The life cycle of foreclosed real estate consists of three phases: acquisition, holding period, and disposition. When foreclosed real estate is received in full satisfaction of a loan, the amount, if any, by which the recorded amount of the loan exceeds the fair value less cost to sell the property is a loss which must be charged to the allowance for loan and lease losses at the time of foreclosure.After foreclosure, each foreclosed real estate asset must be carried at the lower of (1) the fair value of the asset minus the estimated costs to sell the asset or (2) the "cost" of the asset. The accounting and reporting standards for foreclosed real estate are set forth in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors (formerly FAS 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings), and ASC 360, Property, Plant, and Equipment (formerly FAS 144, Accounting for the Otherwise, such assets are reclassified as held and used with recognition of depreciation expense. say that correcting the inconsistency would be responsive to the point that many collateral-dependent real estate loans being carried at 1. foreclosure.

measurement attribute for real estate assets is beyond the scope of this