What are purchased credit impaired loans?
Purchased Credit-Impaired Loans means those loans for which Company Bank accounts for in accordance with Accounting Standards Codification 310-30.
How is a purchased loan recorded at acquisition?
Purchased performing loans (and nonperforming revolving loans) are accounted for under ASC 310-20, and each loan is assigned a fair value mark based on the yield and credit adjustments. Under ASC 310-20, the entire fair value mark (discount/premium) is accreted/amortized into income.
What are purchased or originated credit impaired financial assets?
The definition of a purchased or originated credit impaired (POCI) asset refers to assets for which on initial recognition “one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred,” such as significant financial difficulty, default, and additional …
What is a purchase loan?
A purchase money loan is issued to the buyer of a home by the seller. It is also called seller financing or owner financing. Purchase money loans are often used by buyers who have trouble getting a traditional mortgage due to poor credit.
What is a loan impairment?
A loan is considered to be impaired when it is probable that not all of the related principal and interest payments will be collected.
What is the difference between acquisition and purchase method?
Under the purchase method, the difference between the acquired company’s fair value and its purchase price would be accounted for as negative goodwill on the balance sheet. Under the acquisition method, however, the negative goodwill is treated as a gain on the income statement immediately with the acquisition.
What are poci assets?
Purchased or originated credit-impaired (POCI) deals are financial assets that are credit impaired at initial recognition. A POCI deal can be any financial asset: loan, money market asset, credit card, trade receivable, bond. The information “POCI” is additional information on top of the accounting category.
Why cash is financial asset?
A financial asset is a liquid asset that represents—and derives value from—a claim of ownership of an entity or contractual rights to future payments from an entity. Stocks, bonds, cash, CDs, and bank deposits are examples of financial assets.
What does ASC 310-20 say about direct loan costs?
ASC 310-20 does not dictate the minimum amount of fees and costs that must be deferred but does indicate direct loan costs are to be offset against fees received and only the net amount is to be deferred. Banks should not assume that the difference between immediate and deferred fees and costs is immaterial.
What is ASC 310-20 subtopic?
ASC 310-20 notes that this Subtopic provides “guidance on the recognition, measurement, derecognition, and disclosure of nonrefundable fees, origination costs, and acquisition costs associated with lending activities and loan purchases.”
Can refinancing or extended purchased impaired credits help with ASC 310-30 accounting?
Refinancing or extended purchased impaired credits do not alleviate ASC 310-30 accounting. This makes projecting cash flow challenging for loans expected to be on the books for a significant period of time, as refinances and extension need to be considered when projecting cash flow.
What is the ASC 310 40 for troubled debt restructuring?
310-40 Troubled Debt Restructurings by Creditors ASC 310-40 provides guidance on the “measurement, derecognition, disclosure, and implementation guidance issues concerning troubled debt restructurings focused on the creditor’s records.” ASC 470-60 discusses the debtor’s accounting for troubled debt restructurings.