GAAP checklist

7/30/2019 GAAP checklist

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Accounting: Yes No NA Comments/References

F35 FINANCIAL INSTRUMENTS: SERVICING (12/08)transfers, does the entity recognize and initially measure atfair value, if practicable, a servicing asset or servicingliability each time an entity undertakes an obligation toservice financial assets, unless it transfers the asset to aqualifying SPE in a guaranteed mortgage securitization,retains all of the resulting securities, and classifies them asdebt securities held-to-maturity in accordance with FASB115, in which case it may either separately recognize itsservicing assets or servicing liabilities or report thoseservicing assets or servicing liabilities together with theasset being serviced?

2. Does the enterprise initially recognize servicing assets (or liabilities) at fair value, if practicable?

3. Does the enterprise use one of the two following methodsto subsequently measure each class of servicing assets andliabilities:

a. Amortization Method: Amortize servicing assets or liabilities in proportion to and over the period of estimated net servicing income (if servicing revenuesexceed servicing costs) or net servicing loss (if servicing costs exceed servicing revenues)?

b. Fair Value Measurement Method: Measure servicingassets or servicing liabilities at fair value at eachreporting date?

[NOTE: The election above is to be made separately for eachclass of servicing assets and servicing liabilities and shouldapply the same subsequent measurement method to eachservicing asset and servicing liability in a class. Classes of servicing assets and servicing liabilities shall be identified

based on (a) the availability of market inputs used indetermining the fair value of servicing assets or servicingliabilities, (b) an entity's method for managing the risks of itsservicing assets or servicing liabilities, or (c) both. Onceestablished, the fair value measurement method for each classshall not be changed. If it is not practicable to initiallymeasure a servicing asset or servicing liability at fair value, an

entity should initially recognize the servicing asset or servicing liability in accordance with paragraph 71 andinclude it in a class subsequently measured using theamortization method.]

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F35 FINANCIAL INSTRUMENTS: SERVICING (12/08)

4. For those servicing assets and servicing liabilitiesmeasured using the amortization method, does the

enterprise assess servicing liabilities for increasedobligations and stratified servicing assets for impairment based on fair values at each reporting date?

[NOTE: Impairments for servicing assets should berecognized through a valuation allowance by stratum.]

5. For those servicing assets and servicing liabilitiesmeasured using the fair value measurement method, doesthe enterprise report changes in fair value of servicingassets and servicing liabilities in earnings in the period inwhich the changes occur?

Has the entity complied with the following Issues discussedby the Emerging Issues Task Force, when applicable?

02-9, Accounting for Changes That Result in a Transferor Regaining Control of Financial Assets Sold This Issueaddresses (1) how the transferor should account for retained

beneficial interests when the underlying assets are re-recognized under the provisions of paragraph 55 of FASB 140

because the transferor's contingent right (for example, aROAP or other contingent call option on the transferredfinancial assets) becomes exercisable, including whether anygain or loss should be recognized by the transferor when

paragraph 55 is applied, (2) how assets re-recognized by the

transferor that were previously sold to an SPE that wasformerly considered qualifying should be accounted for whenthe entire SPE becomes nonqualifying under the provisions of

paragraph 55, including whether any gain or loss should berecognized by the transferor when paragraph 55 is applied, (3)whether under any circumstances a loan loss allowance shouldinitially be recorded for loans that do not meet the definitionof a security when they are re-recognized under the provisionsof paragraph 55, (4) how re-recognition under paragraph 55 of assets sold affects the accounting for the related servicingasset, and (5) after a paragraph 55 event, how the transferor should account for its retained interest (other than theservicing asset).

95-5, Determination of What Risks and Rewards, If Any, Can Be Retained and Whether Any Unresolved Contingencies May Exist in a Sale of Mortgage Loan Servicing Rights ThisIssue addresses whether the inclusion of any provision thatresults in the seller's retention of specified risks (1) precludesrecognition of a sale at the date title passes or (2) allowsrecognition of a sale at that date if (a) the seller can reasonablyestimate, and records a liability for, the costs related to

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F35 FINANCIAL INSTRUMENTS: SERVICING (12/08) protection provisions or (b) the sales agreement provides for substantially all risks and rewards to irrevocably pass to the

buyer, and the seller can reasonably estimate, and records aliability for, the minor protection provisions.

90-21, Balance Sheet Treatment of a Sale of MortgageServicing Rights with a Subservicing Agreement In Issue

No. 87-34, Sale of Mortgage Servicing Rights with aSubservicing Agreement, the Task Force reached a consensusthat income should not be recognized immediately as a resultof the sale of mortgage servicing rights with a subservicingagreement. However, the Task Force agreed that a loss should

be recognized currently if the transferor determines that prepayments of the underlying mortgage loans may result in performing the future servicing at a loss. This Issue addresses

whether the transaction described in Issue 87-34 should beaccounted for as a financing or as a sale with the gaindeferred.

88-22, Securitization of Credit Card and Other ReceivablePortfolios This Issue addresses (1) whether a bank shouldaccount for amounts received from transferring to investors a

participating interest in the credit card receivables in the trustas a sale or as a financing transaction, (2) whether the type of liquidation method specified in the credit card securitizationagreement should affect the accounting for the transfer, and(3) if the transfer is reported as a sale, how the gain or loss onthe sale should be calculated.

87-34, Sales of Mortgage Servicing Rights with a Subservicing Agreement This Issue addresses whether a transfer of themortgage servicing rights and the simultaneous agreement to

provide subservicing should be reported by the transferor as asale or a financing and, if reported as a sale, how the gainshould be recognized.

D-51, The Applicability of FASB Statement No. 115 to Desecuritizations of Financial Assets This Issue discussesthe applicability of FASB 115 to the accounting for thedesecuritization of securities into loans or other financialassets (e.g., the process by which securities are transformed

into their underlying loans or other financial assets).

Disclosure: Yes No NA Comments/References


1. Does the enterprise disclose the following for all itsservicing assets and liabilities [FASB 140.17d, 140.17e

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F35 FINANCIAL INSTRUMENTS: SERVICING (12/08)for nonpublic companies and FSP FAS 140-4 and FIN46(R)-8 paragraphs B11(b)(4) and B8 (a)-(c) for publiccompanies]:

a. If it is not practicable to estimate the fair value of servicing assets obtained or servicing liabilitiesincurred in transfers of financial assets during the

period, a description of those items and the reasonswhy it is not practicable to estimate their fair value?

b. Management's basis for determining its classes of servicing assets and servicing liabilities?

c. A description of the risks inherent in servicing assetsand servicing liabilities and, if applicable, theinstruments used to mitigate the income statement

effect of changes in fair value of the servicing assetsand servicing liabilities? (Disclosure of quantitativeinformation about the instruments used to manage therisks inherent in servicing assets and servicingliabilities, including the fair value of those instrumentsat the beginning and end of the period, is encouraged

but not required.)

d. The amount of contractually specified servicing fees,late fees, and ancillary fees earned for each period for which results of operations are presented, including adescription of where each amount is reported in thestatement of income?

2. Have servicing assets been reported separately fromservicing liabilities on the balance sheet? [FASB 140.63as amended by FASB 156]

3. Does the enterprise disclose the following for servicingassets and liabilities subsequently measured at fair value?[FASB 140.17f, as amended by FASB 156 for nonpubliccompanies and FSP FAS 140-4 and FIN 46(R)-8

paragraphs B9(a) and B8(d) for public companies]:

a. For each class of servicing assets and servicingliabilities, the activity in the balance of servicing

assets and the activity in the balance of servicingliabilities (including a description of where changes infair value are reported in the statement of income for each period for which results of operations are

presented) including but not limited to those itemsincluded in FASB 140.17f for nonpublic companiesand FSP FAS 140-4 and FIN 46(R)-8 paragraph B9(a)for public companies?

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b. A description of the valuation techniques or other methods used to estimate the fair value of servicing

assets and servicing liabilities? If a valuation model isused, the description shall include the methodologyand model validation procedures, as well asquantitative and qualitative information about theassumptions used in the valuation model (for example,discount rates and prepayment speeds). (An entitythat provides quantitative information about theinstruments used to manage the risks inherent in theservicing assets and servicing liabilities, asencouraged by paragraph 17(e)(2) of FASB 140 for nonpublic companies and paragraph B8(b) of FSPFAS 140-4 and FIN 46(R)-8 for public companies

(see 1(c) above), is also encouraged, but not required,to disclose a description of the valuation techniques,as well as quantitative and qualitative informationabout the assumptions used to estimate the fair valueof those instruments.)

4. Does the enterprise disclose the following for servicingassets and servicing liabilities subsequently amortized in

proportion to and over the period of estimated netservicing income or loss and assessed for impairment or increased obligation: [FASB 140.17g as amended byFASB 156 for nonpublic companies and FSP FAS 140-4and FIN 46(R)-8 paragraphs B10 and B8(d) for publiccompanies]:a. For each class of servicing assets and servicing

liabilities, the activity in the balance of servicingassets and the activity in the balance of servicingliabilities (including a description of where changes inthe carrying amount are reported in the statement of income for each period for which results of operationsare presented, including but not limited to those itemsincluded in FASB 140.17g for nonpublic companiesand FSP FAS 140-4 and FIN 46(R)-8 paragraphB10(a) for public companies)?

b. For each class of servicing assets and servicingliabilities, the fair value of recognized servicing assetsand servicing liabilities at the beginning and end of the period if it is practicable to estimate the value?

c. A description of the valuation techniques or other methods used to estimate fair value of the servicingassets and servicing liabilities? If a valuation model isused, the description shall include the methodology

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F35 FINANCIAL INSTRUMENTS: SERVICING (12/08)and model validation procedures, as well asquantitative and qualitative information about theassumptions used in the valuation model (for example,discount rates and prepayment speeds). (An entitythat provides quantitative information about theinstruments used to manage the risks inherent in theservicing assets and servicing liabilities, asencouraged by paragraph 17(e)(2) of FASB 140 for nonpublic companies and FSP FAS 140-4 and FIN46(R)-8 paragraph B8(b) for public companies (see1(c) above), is also encouraged, but not required, todisclose a description of the valuation techniques aswell as quantitative and qualitative information aboutthe assumptions used to estimate the fair value of those instruments.)

d. The risk characteristics of the underlying financialassets used to stratify recognized servicing assets for

purposes of measuring impairment in accordance with paragraph 63 of FASB 140?

e. The activity by class in any valuation allowance for impairment of recognized servicing assets including beginning and ending balances, aggregateadditions charged and recoveries credited tooperations, and aggregate write-downs chargedagainst the allowance for each period for whichresults of operations are presented?

5. Does the enterprise report recognized servicing assets andservicing liabilities that are subsequently measured usingthe fair value measurement method in a manner thatseparates those carrying amounts on the face of thestatement of financial position from the carrying amountsfor separately recognized servicing assets and servicingliabilities that are subsequently measured using theamortization method. Has the enterprise accomplishedthis reporting through either (a) display of separate lineitems for the amounts that are subsequently measuredusing the fair value measurement method and amounts

that are subsequently measured using the amortizationmethod or (b) presentation of the aggregate of thoseamounts that are subsequently measured at fair value andthose amounts that are subsequently measured using theamortization method and disclose parenthetically theamount that is subsequently measured at fair value that isincluded in the aggregate amount? [FASB 140.13B asamended by FASB 156]

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6. If the enterprises elects the option to subsequentlymeasure at fair value separately recognized servicing

assets and servicing liabilities existing as of the beginningof the fiscal year that the enterprise adopts FASB 156, hasthe difference between the fair value and the carryingamount, net of any related valuation allowance, of separately recognized servicing assets and servicingliabilities existing at the date of initial application of thesubsequent fair value measurement been recorded as acumulative-effect adjustment to retained earnings as of the

beginning of the fiscal year and been separately disclosed?[FASB 156.9]

7. Upon initial adoption of FASB 156, if the enterprise electsthe option to reclassify available-for-sale securities totrading securities as of the beginning of the fiscal year of adoption, has the carrying amount of reclassifiedsecurities and the effect of that reclassification on thecumulative-effect adjustment been separately disclosed?[FASB 156.10]

8. If the enterprise elects the option to subsequently measurea class of separately recognized servicing assets andservicing liabilities at fair value as of the beginning of anyfiscal year that begins subsequent to initial adoption of FASB 156, has the amount of the cumulative-effectadjustment been separately disclosed? [FASB 156.11]


F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)

This section addresses the accounting by a transferor and atransferee for all transfers of financial assets.

Financial assets include cash, evidence of an ownershipinterest in an entity, or a contract that conveys to an entity aright (a) to receive cash or another financial instrument from asecond entity or (b) to exchange other financial instruments on

potentially favorable terms with the second entity. Typicalfinancial assets include receivables, debt and equity securities,and direct financing and sales-type lease receivables. [FASB140.01, 140.364]

1. Does the enterprise account for a transfer of financialassets (or all or a portion of a financial asset) as a sale tothe extent that consideration other than beneficial interestsin the transferred assets is received in exchange when allof the following conditions, indicating a surrender of

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)control over the transferred assets, have been met: [FASB140.09]

a. Have the transferred assets been isolated from thetransferor (i.e., put presumptively beyond the reach of the transferor and its creditors) even in bankruptcy or other receivership?

b. Has each transferee (or, if the transferee is aqualifying SPE, each holder of its beneficial interests)obtained the right to pledge or exchange the assets (or

beneficial interests) it received and no condition bothconstrains the transferee (or holder) from takingadvantage of that right to pledge or exchange and

provides more than a trivial benefit to the transferor?

c. Has the transferor not maintained effective controlover the transferred assets through either (1) anagreement that both entitles and obligates thetransferor to repurchase or redeem them before their maturity or (2) the ability to unilaterally cause theholder to return specific assets, other than through acleanup call?

2. If a transfer of financial assets in exchange for cash or other consideration (other than beneficial interests in thetransferred assets) does not meet the criteria for a saleindicated above, does the enterprise account for thetransfer as a secured borrowing with pledge of collateral?[FASB 140.12]

3. Upon completion of any transfer of financial assets, (regardless of whether the transfer satisfies the conditionto be accounted for as a sale) does the transferor: [FASB140.10, as amended by FASB 156]

a. Initially recognize and measure at fair value, if practicable, servicing assets and servicing liabilitiesthat require recognition under the provisions of

paragraph 13 of FASB 140?

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b. Allocate the previous carrying amount between theassets sold, if any, and the interests that continue to be

held by the transferor, if any, based on their relativefair values at the date of transfer?

c. Continue to carry in its statement of financial positionany interest it continues to hold in the transferredassets, including, if applicable, beneficial interests inassets transferred to a qualifying SPE in asecuritization, and any undivided interests?

4. Upon completion of a transfer of financial assets thatsatisfies the conditions to be accounted for as a sale, doesthe transferor (seller): [FASB 140.11, as amended byFASB 156]

a. Derecognize all assets sold?

b. Recognize all assets obtained and liabilities incurredin consideration as proceeds of the sale, includingcash, put or call options held or written (e.g.,guarantee or recourse obligations), forwardcommitments (e.g., commitments to deliver additionalreceivables during the revolving periods of somesecuritizations), swaps (e.g., provisions that convertinterest rates from fixed to variable), and servicingassets and servicing liabilities, if applicable?

c. Initially measure at fair value assets obtained andliabilities incurred in a sale or, if it is not practicableto estimate the fair value of an asset or a liability,apply alternative measures?

[NOTE: For entities that have adopted FASB 157, entitiesshould follow FASB 157 when determining fair value to theextent FASB's practical expedients do not apply.]

d. Recognize in earnings any gain or loss on the sale?

5. Upon completion of a transfer of assets that satisfies theconditions to be accounted for as a sale, does thetransferee recognize all assets obtained and any liabilities

incurred and initially measure them at fair value (inaggregate, presumptively the price paid)? [FASB 140.11]

6. If it is not practicable to estimate the fair value of assetsobtained, has the transferor recorded those assets at zero?If it is not practicable to estimate the fair value of liabilities, has the transferor recognized no gain on thetransaction and recorded those liabilities at the greater of (1) the excess, if any, of (a) the fair values of assets

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)obtained less the fair values of other liabilities incurredover (b) the sum of the carrying values of the assetstransferred, or (2) the amount that would be recognized inaccordance with FASB 5 as interpreted by FASBInterpretation 14? [FASB 140.71]

7. For interest-only strips, loans, other receivables, other interests that continue to be held by a transferor in asecuritization, or other financial assets that cancontractually be prepaid or otherwise settled in such a waythat the holder would not recover substantially all of itsrecorded investment (except for instruments that arederivatives under FASB 133), have such investments beensubsequently measured similar to investments in debtsecurities classified as available-for-sale or trading under

FASB 115? [FASB 140.14, as amended by FASB 156][NOTE: See EITF 99-20 and FSP 115-1/124-1 concerning thedetermination of whether there is an other-than-temporaryimpairment and the measurement thereof]

This section (through question 4) addresses the debtor's andlender's accounting for a collateral arrangement in a secured

borrowing.

A debtor may grant a security interest in certain assets to alender (the secured party) to serve as collateral for itsobligation under a borrowing, with or without recourse toother assets of the debtor. An obligor under other kinds of current or potential obligations (e.g., interest rate swaps) mayalso grant a security interest in certain assets to a secured

party. If collateral is transferred to the secured party, thecustodial arrangement is commonly referred to as a pledge.Secured parties sometimes are permitted to sell or repledge (or otherwise transfer) collateral held under a pledge. The samerelationships occur, under different names, in transfersdocumented as sales that are accounted for as secured

borrowings. The accounting for noncash collateral by thedebtor (or obligor) and the secured party depends on whether the secured party has the right to sell or repledge the collateraland on whether the debtor has defaulted. [FASB 140.15]

1. If the secured party (transferee) has the right by contractor custom to sell or repledge the collateral, does the debtor (transferor) reclassify that asset and report that asset in itsstatement of financial position separately from other assetsnot so encumbered?

2. If the enterprise is the secured party (transferee) and itsells collateral pledged to it, does the enterprise recognize

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)the proceeds from the sale and its obligation to return thecollateral?

3. If the debtor (transferor) defaults under the terms of thesecured contract and is no longer entitled to redeem the

pledged asset, does the enterprise, if it is the debtor,derecognize the pledged asset, or if the enterprise is thesecured party (transferee), does it recognize the collateralas its asset initially measured at fair value, or if it hasalready sold the collateral, has it derecognized itsobligation to return the collateral?

4. Except as provided in 3, above, does the enterprisecontinue to carry the collateral as its asset if it is thedebtor (transferor), or not recognize the pledged asset if itis the secured party (transferee)?

Has the entity complied with the following Issues discussedby the Emerging Issues Task Force, when applicable?

02-12, Permitted Activities of a Qualifying Special-Purpose Entity in Issuing Beneficial Interests under FASB Statement No. 140 This Issue addresses:

1. The extent to which a qualifying SPE (or its affiliate or agent) is permitted to determine the terms of beneficialinterests issued after the inception of the qualifying SPE(a) prior to the derecognition by the transferor of theassets that the beneficial interests represent (Example (1)or (b) after derecognition by the transferor of the assetsthat the beneficial interests represent (Example 2),

2. If an existing SPE (or its designee or agent) determinesthe terms of new beneficial interests, whether theconditions requiring that a qualifying SPE's activities be"significantly limited" and "entirely specified" have adifferent effect on a structure that contains long-termassets and issues short-term beneficial interests (LT/STstructure, Example 2 than on a structure that containsshort-term assets and issues long-term beneficial interests

(ST/LT structure, Example 1), and3. If a qualifying SPE (or its designee or agent) is

permitted to determine the terms of newly issued beneficial interests as described in Issue 1, whether itwould be permissible for the transferor to have the abilityto direct the qualifying SPE to prepay previously issued

beneficial interests with proceeds of newly issued beneficial interests.

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02-10, Determining Whether a Debtor Is Legally Released asPrimary Obligor When the Debtor Becomes Secondarily

Liable under the Original Obligation This Issue relates towhether a debtor has been legally released from being the primary obligor (paragraph 16(b) of FASB 140) in a paymentundertaking arrangement (or similar arrangement) that

purports to make the original debtor secondarily liable for theoriginal obligation.

02-9, Accounting for Changes That Result in a Transferor Regaining Control of Financial Assets Sold This Issueaddresses (1) how the transferor should account for retained

beneficial interests when the underlying assets are re-recognized under the provisions of paragraph 55 of FASB 140

because the transferor's contingent right (for example, aROAP or other contingent call option on the transferredfinancial assets) becomes exercisable, including whether anygain or loss should be recognized by the transferor when

paragraph 55 is applied, (2) how assets re-recognized by thetransferor that were previously sold to an SPE that wasformerly considered qualifying should be accounted for whenthe entire SPE becomes nonqualifying under the provisions of

paragraph 55, including whether any gain or loss should berecognized by the transferor when paragraph 55 is applied, (3)whether under any circumstances a loan loss allowance shouldinitially be recorded for loans that do not meet the definitionof a security when they are re-recognized under the provisionsof paragraph 55, (4) how re-recognition under paragraph 55 of assets sold affects the accounting for the related servicingasset, and (5) after a paragraph 55 event, how the transferor should account for its retained interest (other than theservicing asset).

98-15, Structured Notes Acquired for a Specified Investment Strategy For the purpose of achieving a certain strategicinvestment result for an investor, structured note securitiesmay be issued in combination with other structured notesecurities as a unit or a pair. This Issue addresses whether aninvestor should account for the two structured note securitiestogether as a unit or account for each security separately.

92-2, Measuring Loss Accruals by Transferors for Transfersof Receivables with Recourse This Issue addresses (1) whatthe appropriate basis is for determining the amount of creditlosses to be included in the measurement of the recourseobligation and (2) whether it is appropriate for the transferor to recognize its obligation under the recourse provision on a

present value basis in complying with the requirement of

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08) paragraph 6 of FASB 77, and if so, what discount rate to usein the present-value-based measurement and how tosubsequently account for the recourse obligation.

90-18, Effect of a "Removal of Accounts" Provision on the Accounting for a Credit Card Securitization This Issueaddresses whether credit card securitizations with certainremoval-of-accounts provisions should be recognized as saletransactions under FASB 77.

89-2, Maximum Maturity Guarantees on Transfers of Receivables with Recourse This Issue addresses whether the seller may account for the transfer of the receivables as asale if the purchaser has an option to put the receivables back to the seller (or the seller has an option to call the receivables)at a specified future date at which the outstanding balances areexpected to be minor based on the seller's estimate of

prepayments but are not minor based on contractual paymentterms.

88-20, Difference between Initial Investment and Principal Amount of Loans in a Purchased Credit Card Portfolio This Issue addresses (1) whether the difference between theamount paid and the sum of the balances of the credit cardloans at the date of purchase (the premium) should beallocated between the loans acquired and any identifiableintangible assets acquired and (2) over what periods theamounts allocated to the loans acquired and the identifiable

intangible assets acquired should be amortized.88-22, Securitization of Credit Card and Other ReceivablePortfolios This Issue addresses (1) whether a bank shouldaccount for amounts received from transferring to investors a

participating interest in the credit card receivables in the trustas a sale or as a financing transaction, (2) whether the type of liquidation method specified in the credit card securitizationagreement should affect the accounting for the transfer, and(3) if the transfer is reported as a sale, how the gain or loss onthe sale should be calculated.

88-11, Allocation of Recorded Investment When a Loan or Part of a Loan is Sold

This Issue addresses how anenterprise's recorded investment in a loan should be allocated between the portion of the loan sold (for purposes of determining the gain or loss on the sale) and the portionretained (for purposes of determining the remaining recordedinvestment).

87-30, Sale of a Short-Term Loan Made under a Long-TermCredit Commitment This Issue relates to whether a transfer

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)of a short-term loan should be accounted for as a sale or as afinancing.

86-8, Sale of Bad-Debt Recovery Rights A financialinstitution (seller) sells to a third-party buyer the right to anamount of future recoveries from loans previously written off

by the seller as uncollectible. This Issue addresses whether this transaction, from the seller's perspective, represents:

1. A sale of recovery rights, with a resulting gain at the dateof the transaction,

2. Recovery of previous write-offs, which would be recordedas a credit to the allowance for loan losses,

3. Borrowing secured by the potential recovery rights, whichwould be recorded as a liability and would not affect theincome statement, or 4. Secured borrowing with a basis of repayment of principaland interest (limited to recoveries of previously written-off loans) that provides a basis for considering the amount of thetransaction in computing the current year's loan-loss provision(to the extent that potential recoveries had previously not beenconsidered).

85-40, Comprehensive Review of Sales of MarketableSecurities with Put Arrangements This Issue addresses how

profit or loss resulting from sales of marketable securities with put arrangements should be recognized and how the securitiesinvolved should be presented in the balance sheet.85-25, Sale of Preferred Stocks with a Put Option Afinancial institution (transferor) owns perpetual preferredstocks (that is, the preferred stocks have no mandatoryredemption requirement) and transfers them at their originalcost, which is higher than current market value. As part of the"sale" agreement, the transferor simultaneously grants a putoption to the transferee that allows the transferee to transfer the preferred stocks back to the transferor in the future at afixed price. This Issue addresses whether the transferor should account for the transfer as a sale or as a borrowing and,if the transfer is accounted for as a borrowing, how the

preferred stocks should be reported on the transferor's balancesheet.

84-5, Sale of Marketable Securities with a Put Option ThisIssue describes the sale of a marketable security to a third-

party buyer, with the buyer having an option to "put" thesecurity back to the seller at a specified future date or dates for a fixed price. Because of the put option, the seller generallyreceives a premium price for the security. This Issue

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)addresses whether the seller-transferor should account for thetransfer as a sale or as a borrowing and, if the transfer isaccounted for as a borrowing, whether impairment of the assetshould be recognized.

D-69, Gain Recognition on Transfers of Financial AssetsUnder FASB Statement No. 125 This Announcementreminds financial statement preparers of the requirements for recognition, measurement, and disclosure for sales or securitizations of financial assets and to assets that areretained or received or liabilities that are incurred.

D-67, Isolation of Assets Transferred by Financial Institutionsunder FASB Statement No. 125 This Announcement is inresponse to technical inquiries regarding the isolation of assetstransferred by financial institutions potentially subject toFDIC receivership.

D-66, Effect of a Special-Purpose Entity's Powers to Sell, Exchange, Repledge, or Distribute Transferred Financial Assets under FASB Statement No. 125 This Announcementdiscusses the effect of a special-purpose entity's powers tosell, exchange, repledge, or distribute transferred financialassets under FASB No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of

Liabilities.

D-65, Maintaining Collateral in Repurchase Agreements and Similar Transactions under FASB Statement No. 125 ThisAnnouncement relates to whether under FASB No. 125,

Accounting for Transfers and Servicing of Financial Assetsand Extinguishments of Liabilities, a transferor hassurrendered effective control if it (1) has an agreement that

both entitles and obligates it to repurchase or redeem thetransferred assets before their maturity (paragraph 9(c)(1)) but(2) does not maintain sufficient collateral to fund substantiallyall of the cost of purchasing replacement assets from others(paragraphs 27(b) and 29).

D-63, Call Options "Embedded" in Beneficial Interests Issued by a Qualifying Special-Purpose Entity This

Announcement discusses call options "embedded" in beneficial interests issued by a qualifying special-purposeentity (QSPE).



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[NOTE: In December 2008, the FASB issued Staff Position (FSP) No. FAS 140-4 and FIN 46R-8,

Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities , to require public companies provideadditional disclosures that are intended to provide greater transparency to financial statement users about atransferors continuing involvement with transferredfinancial assets.]

Nonpublic Companies:

1. If the entity has securitized financial assets during any period presented and accounts for that transfer as a sale,has the entity disclosed, for each major asset type (e.g.,mortgage loans, credit card receivables, and automobileloans): [FASB 140.17h as amended by FASB 156]a. Its accounting policies for initially measuring the

retained interests that continue to be held by thetransferor, if any, and servicing assets or liabilities, if any, including the methodology (whether quotedmarket price, prices based on sales of similar assetsand liabilities, or prices based on valuationtechniques) used in determining their fair value?

b. The characteristics of securitizations (a description of the transferor's continuing involvement with thetransferred assets, including, but not limited to,

servicing, recourse, and restrictions on interests thatcontinue to be held by the transferor) and the gain or loss from sale of financial assets in securitizations?

c. The key assumptions used in measuring the fair valueof interests that continue to be held by the transferor and servicing assets or servicing liabilities, if any, atthe time of securitization (including, at a minimum,quantitative information about discount rates,expected prepayments including the expectedweighted-average life of prepayable financial assets,and anticipated credit losses, if applicable)?

d. Cash flows between the securitization special-purposeentity (SPE) and the transferor, unless reportedseparately elsewhere in the financial statements or notes (including proceeds from new securitizations,

proceeds from collections reinvested in revolving- period securitizations, purchases of delinquent or foreclosed loans, servicing fees, and cash flowsreceived on interests that continue to be held by thetransferor)?

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2. If the entity has interests that continue to be held by thetransferor in financial assets that it has securitized or

servicing assets or servicing liabilities relating to assetsthat it has securitized, at the date of the latest statement of financial position presented, has the entity disclosed, for each major asset type (e.g., mortgage loans, credit cardreceivables, and automobile loans)? [FASB 140.17i asamended by FASB 156]

a. Its accounting policies for subsequently measuringthose interests, including the methodology (whether quoted market price, prices based on sales of similar assets and liabilities, or prices based on valuationtechniques) used in determining their fair value?

b. The key assumptions used in subsequently measuringthe fair value of those interests (including, at aminimum, quantitative information about discountrates, expected prepayments including the expectedweighted-average life of prepayable financial assets,and anticipated credit losses, including expected static

pool losses, if applicable)?

c. A sensitivity analysis or stress test showing thehypothetical effect on the fair value of those interests(including any servicing assets or servicing liabilities)of two or more unfavorable variations from theexpected levels for each key assumption that isreported under item 2b, above, independently fromany change in another key assumption, and adescription of the objectives, methodology, andlimitations of the sensitivity analysis or stress test?

d. For the securitized assets and any other financialassets that it manages together with them, excludingsecuritized assets that an entity continues to service

but with which it has no other continuinginvolvement:

(1) The total principal amount outstanding, the portion that has been derecognized, and the portion that continues to be recognized ineach category reported in the statement of financial position, at the end of the period?

(2) Delinquencies at the end of the period?

(3) Credit losses, net of recoveries, during the period?

(4) Average balances during the period?

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)[NOTE: This disclosure is encouraged, butnot required.]

3. Does the enterprise disclose a description of the nature of restrictions placed on assets if they have been set asideafter the effective date of FASB 125 solely for satisfyingscheduled payments of a specific obligation? [FASB140.17c]

4. If it is not practicable to estimate the fair value of certainassets obtained or liabilities incurred in transfers of financial assets during the period, has the entity provideda description of those items and the reasons why it is not

practicable to estimate their fair value? [FASB 140.17d]

5. If the entity has pledged collateral as part of a secured

borrowing, entered into securities lending transaction, or entered into repurchase agreements during any period presented, has it disclosed: [FASB 140.17a]

a. Its policy for requiring collateral or other security if theentity has entered into repurchase agreements or securities lending transactions?

b. The carrying amount and classification of those assetsas of the date of the latest statement of financial

position presented, that the entity has pledged ascollateral that are not reclassified and separatelyreported in the statement of financial position

pursuant to paragraph 15(a) of FASB 140?c. The fair value as of the date of each statement of

financial position presented of any collateral that theentity has accepted that it is permitted by contract or custom to sell or repledge and the fair value of the

portion of that collateral that is has sold or repledged,and information about the sources and uses of thatcollateral?

Public Companies:

1. If the entity has accounted for the transfer of financialassets as a sale and has continuing involvement with the

transferred assets, has the entity disclosed for each incomestatement presented: [FSP FAS 140-4 and FIN 46(R)-8 paragraph B11(a)]

a. Its accounting policies for initially measuring theinterests that continue to be held by the transferor, if any, and servicing assets or servicing liabilities, if any, unless such information is not required by other U.S. GAAP and is not meaningful to financial

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)statement user?

b. The characteristics of the transfer, including a

description of the transferors continuing involvementwith the transferred financial assets and the gain or loss from sale of transferred financial assets?

c. Cash flows between a transferee and the transferor,including proceeds from new transfers, proceeds fromcollections reinvested in revolving period transfers,

purchases of previously transferred financial assets (or its underlying collateral), servicing fees, and cashflows received on the interests that continue to be held

by the transferor, unless such information is notrequired by other U.S. GAAP and is not meaningful tofinancial statement user?

2. If the entity has accounted for the transfer of financialassets as a sale and has continuing involvement with thetransferred assets, has the entity disclosed for eachstatement of financial position presented (unless suchinformation is not required by other U.S. GAAP and is notmeaningful to financial statement users): [FSP FAS 140-4and FIN 46(R)-8, paragraph B11(b)]

a. Qualitative and quantitative information about thetransferors continuing involvement with transferredfinancial assets that provides financial statement userswith sufficient information to assess the reasons for the continuing involvement and the risks related to thetransferred financial assets to which the transferor continues to be exposed after the transfer and theextent that the transferors risk profile has changed asa result of the transfer (including, but not limited to,credit risk, interest rate risk, and other risks),including:

(1) The nature, purpose, size, and activities of SPEsutilized to facilitate a transfer of financial assets,if applicable, including how the SPEs arefinanced?

(2) The total principal amount outstanding, theamount that has been derecognized, and theamount that continues to be recognized in thestatement of financial position?

(3) The terms of any arrangements that couldrequire the transferor to provide financialsupport (for example, liquidity arrangements andobligations to purchase assets) to the transferee

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)or its beneficial interest holders, including adescription of any events or circumstances thatcould expose the transferor to loss? Allavailable evidence shall be considered,including, but not limited to, explicit writtenarrangements, communications between thetransferor and the transferee or its beneficialinterest holders, and unwritten arrangementscustomary in similar transfers?

(4) Whether the transferor has provided financial or other support during the periods presented that itwas not previously contractually required to

provide to the transferee or its beneficial interestholders, including when the transferor assisted

the transferee or its beneficial interest holders inobtaining support and the type, amount and primary reasons for providing the support?

[NOTE: Information about liquidityarrangements, guarantees and/or other commitments by third parties related to thetransferred financial assets that may affect thefair value or risk of interest that continues to beheld by the transferor is encouraged.]

b. Its accounting policies for subsequently measuringassets or liabilities that relate to the continuing

involvement with the transferred financial assets?c. The key inputs and assumptions used in measuring the

fair value of assets or liabilities that relate to thetransferors continuing involvement (including, at aminimum and if applicable, quantitative informationabout discount rates, expected prepayments includingthe expected weighted-average life of prepayablefinancial assets, and anticipated credit losses,including expected static pool losses)?

d. A description of those assets obtained or liabilitiesincurred in a transfer of financial assets during the

period where it is not practicable to estimate their fair value and the reasons why?

e. A sensitivity analysis or stress test for interests thatcontinue to be held by the transferor in financialassets, showing the hypothetical effect on the fair value of those interests, including any servicing assetsor servicing liabilities, of two or more unfavorablevariations from the expected levels for each key

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)assumption that is reported, independently from anychange in another key assumption, and a descriptionof the objectives, methodology, and limitations of thesensitivity analysis or stress test?

f. Information about the asset quality of transferredfinancial assets and any other financial assets that itmanages together with them? [NOTE: Thisinformation shall be separated between assets thathave been derecognized and assets that continue to berecognized in the statement of financial position and isintended to provide financial statement users with anunderstanding of the risks inherent in the transferredfinancial assets as well as in other financial assets andliabilities that it manages together with transferred

financial assets. In determining the information thatshould be disclosed, an entity shall consider thedisclosures required by other pronouncementsapplicable to the transferred financial asset. For example information for receivables shall include, butis not limited to (a) delinquencies at the end of the

period and (b) credit losses, net of recoveries, duringthe period.]

3. If the entity has accounted for the transfer of financialassets as secured borrowings, have they disclosed thecarrying amount and classification of assets and associatedliabilities recognized in the transferors statement of financial position at the end of each period presented,including qualitative information about the relationship(s)

between those assets and associated liabilities? For example, if assets are restricted solely to satisfy a specificobligation, the carrying amount of those assets andassociated liabilities, including a description of the natureof restrictions placed on the assets. [FSP FAS 140-4 andFIN 46(R)-8 paragraph B12]

4. If the entity has pledged collateral as part of a secured borrowing, entered into securities lending transaction, or entered into repurchase agreements during any period

presented, has it disclosed: [FSP FAS 140-4 and FIN46(R)-8 paragraph B6]

a. Its policy for requiring collateral or other security if the entity has entered into repurchase agreements or securities lending transactions?

b. The carrying amount and classification of those assetsas of the date of the latest statement of financial

position presented, that the entity has pledged as

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F39 FINANCIAL INSTRUMENTS: TRANSFERS (12/08)collateral and the associated liabilities, includingqualitative information about the relationship(s)

between those assets and the associated liabilities?

c. The fair value as of the date of each statement of financial position presented of any collateral that theentity has accepted that it is permitted by contract or custom to sell or re-pledge and the fair value of the

portion of that collateral that is has sold or re-pledged,and information about the sources and uses of thatcollateral?

[NOTE: Disclosures required for public companiesmay be reported in the aggregate for similar transfersif separate reporting of each transfer would not

provide more useful information to financial statementusers. A transferor shall disclose how similar transfersare aggregated. A transferor shall distinguish betweentransfers that are accounted for as secured borrowingsand transfers that are accounted for as sales. Atransferor shall further distinguish between transfersto qualifying SPEs accounted for as sales and all other transfers accounted for as sales. In determiningwhether to aggregate the disclosures for multipletransfers, the reporting entity shall consider quantitative and qualitative information about thecharacteristics of the transferred financial assets.]


F41 FINANCIAL INSTRUMENTS WITHCHARACTERISTICS OF BOTH LIABILITIES AND EQUITY(12/08)

A. Mandatorily Redeemable Financial Instruments

FASB 150 requires that mandatorily redeemable shares (suchas mandatorily redeemable common or preferred stock) beclassified as liabilities (and not in the "mezzanine" betweenliabilities and equity). It also applies to certain derivatives andother contracts that are indexed to the company's own stock and that may ultimately require the issuer to pay cash or avariable number of shares to the counterparty. Thosederivatives may be classified as liabilities or assets dependingupon their terms.

1. Have financial instruments issued in the form of sharesthat embody an unconditional obligation requiring theissuer to redeem the instrument by transferring cash or

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other assets at a specified or determinable date (or dates)or upon an event certain to occur been classified as aliability (unless the redemption is required to occur onlyupon the liquidation or termination of the reportingentity)? [FASB 150.09, FSP FASB 150-3]

2. Have financial instruments issued in the form of sharesthat embody a conditional obligation to redeem theinstrument by transferring cash or other assets upon anevent not certain to occur been reclassified to a liability if the event occurred, the condition was resolved, or theevent became certain to occur? [FASB 150.10]

B. Obligations to Repurchase the Issuer's EquityShares by Transferring Assets

3. Has any financial instrument, other than an outstandingshare, that, at inception, (a) embodies an obligation torepurchase the issuer's equity shares, or is indexed to suchan obligation, and (b) requires or may require the issuer tosettle the obligation by transferring assets been classifiedas a liability (or asset in some circumstances)? [NOTE:Examples of these contracts include physically settledforward contracts and written put options on thecompany's stock and warrants to acquire certain puttableshares (preferred or common) of the entity.] [FASB

150.11, FSP FASB 150-1, FSP FASB 150-5]C. Certain Obligations to Issue a Variable Number of

Shares

Monetary Value is defined in FASB 150 as "what the fair value of the cash, shares, or other instruments that a financialinstrument obligates the issuer to convey to the holder would

be at the settlement date under specified market conditions."

4. Has any financial instrument that embodies anunconditional obligation, or any financial instrument other than an outstanding share that embodies a conditionalobligation, that the issuer must or may settle by issuing avariable number of its equity shares been classified as aliability (or asset in some circumstances) if, at inception,the monetary value of the obligation is based solely or

predominantly on any one of the following: [FASB150.12, FSP FASB 150-1]

a. A fixed monetary amount known at inception (anexample is share-settled debt)?

b. Variations in something other than the fair value of

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the issuer's equity shares (an example would be aderivative indexed to the S&P 500 that requiressettlement in the issuer's shares)?

c. Variations inversely related to changes in the fair value of the issuer's equity shares (an example would

be a net share-settled written put option)?

D. Freestanding Financial Instruments

FASB 150 defines a freestanding financial instrument as "Afinancial instrument that is entered into separately and apartfrom any of the entity's other financial instruments or equitytransactions, or that is entered into in conjunction with some

other transaction and is legally detachable and separatelyexercisable."

5. Have the provisions of FASB 150 only been applied tofreestanding financial instruments, including those thatcomprise more than one option or forward contract?[FASB 150.13, FSP FASB 150-1]

6. Where a freestanding financial instrument comprises morethan one option or forward contract, have the provisions initems 1-4 above been applied to the freestanding financialinstrument in its entirety? [FASB 150.13]

7. In applying the provisions of FASB 150, havenonsubstantive or minimal features been disregarded?[FASB 150.08]

8. In applying the provisions in paragraphs 9-12 of FASB150, have freestanding financial instruments within thescope of FASB 150 not been combined with another freestanding financial instrument, unless combination isrequired under the provisions of FASB 133 and relatedguidance? [FASB 150.14]

E. Embedded Features

9. Have the provisions of FASB 150 not been applied to

features embedded in a financial instrument that is not aderivative in its entirety, but instead analyzed by applyingother applicable guidance? [FASB 150.15]

F. Scope Limitations

10. Has applying the provisions of FASB 150 not affected thetiming of recognition of financial instruments issued ascontingent consideration in a business combination?[FASB 150.16]

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11. Have financial instruments within the scope of FASB 150that have been issued as consideration (whether contingentor noncontingent) in a business combination beenclassified pursuant to the requirements of FASB 150?[FASB 150.16]

12. Have the provisions of FASB 150 been applied to afreestanding financial instrument that was issued under astock-based compensation arrangement but is no longer subject to FASB 123(R), SOP 93-6, or related guidance?[NOTE: The provisions of FASB 150 do not apply toobligations under stock-based compensation arrangementsif those obligations are still accounted for under FASB123(R), SOP 93-6, or related guidance.] [FASB 150.17,FSP FASB 150-4, FSP 123(R)-1]

13. Have the provisions of FASB 150 not been applied toregistration payment arrangements within the scope of FSP EITF 00-19-2? [FASB 150.17A, FSP EITF 00-19-2.14]

G. Presentation

14. Some entities have no equity instruments outstanding buthave financial instruments in the form of shares, all of which are mandatorily redeemable financial instruments

required to be classified as liabilities. Have those entitiescomplied with the following: [FASB 150.19, FASB150.28, FSP FASB 150-2]

a. Described those instruments as shares subject tomandatory redemption in statements of financial

position to distinguish those instruments from other liabilities?

b. Presented payments to holders of such instrumentsand related accruals separately from payments to andinterest due to other creditors in statements of cashflows and income?

c. Disclosed the components of the liability that wouldotherwise be related to shareholders' interest and other comprehensive income (if any) subject to theredemption feature (for example, par value and other

paid-in amounts of mandatorily redeemableinstruments shall be disclosed separately from theamount of retained earnings or accumulated deficit)?

15. Have warrants for puttable or mandatorily redeemable

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equity securities (e.g., puttable preferred stock or puttablecommon stock) been analyzed and classified as a liabilityunder paragraph 11, regardless of the number of conditions leading up to the possible transfer of assets for those warrants or the fact that the share repurchase featureis conditional on a defined contingency? [FSP FASB150-5]

H. Initial and Subsequent Measurement

16. Have mandatorily redeemable financial instruments beeninitially measured at fair value? [FASB 150.20]

17. Have forward contracts that require physical settlement by

repurchase of a fixed number of the issuer's shares inexchange for cash been initially measured at the fair valueof the shares at inception, adjusted for any considerationor unstated rights or privileges? Was equity reduced byan amount equal to the fair value of the shares atinception? [FASB 150.21]

18. Have all other financial instruments within the scope of FASB 150 been measured initially at fair value? [FASB150.23]

19. For forward contracts that require physical settlement byrepurchase of a fixed number of the issuer's equity shares

in exchange for cash and mandatorily redeemablefinancial instruments where the amount to be paid and thesettlement date are fixed, have they been measuredsubsequently at the present value of the amount to be paidat settlement, accruing interest cost using the rate implicitat inception? [FASB 150.22]

20. For forward contracts that require physical settlement byrepurchase of a fixed number of the issuer's equity sharesin exchange for cash and mandatorily redeemablefinancial instruments where the amount to be paid or thesettlement date varies based on specified conditions, havethey been measured subsequently at the amount of cashthat would be paid under the conditions specified in thecontract if settlement occurred at the reporting date,recognizing the resulting change in that amount from the

previous reporting date as interest cost? [FASB 150.22]

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21. For holders of forward contracts that require physicalsettlement by repurchase of a fixed number of the issuer'sequity shares in exchange for cash or mandatorilyredeemable financial instruments, have any amounts paidto them in excess of the initial measurement amount beenreflected in interest cost? [FASB 150.22]

22. For a conditionally redeemable financial instrument that becomes mandatorily redeemable, has the issuer measuredthe liability initially at fair value upon reclassification, andhas the issuer reduced equity by the amount of that initialmeasure, recognizing no gain or loss? [FASB 150.23]

23. For all remaining financial instruments within the scope of FASB 150 that are not covered in paragraph 22 of FASB150 (that is, they are neither forward contracts that require

physical settlement by repurchase of a fixed number of theissuer's equity shares in exchange for cash nor mandatorily redeemable financial instruments), have they

been subsequently measured at fair value with changes infair value recognized in earnings, unless either FASB 150or other accounting guidance specifies a differentmeasurement attribute? [FASB 150.24]



1. For all instruments within the scope of FASB 150, havethe following items been disclosed? [FASB 150.26]

a. The nature and terms of the financial instruments?

b. The rights and obligations embodied in thoseinstruments?

c. Information about settlement alternatives, if any, inthe contract and identification of the entity thatcontrols any such settlement alternatives?

2. For all outstanding financial instruments within the scopeof FASB 150 and for each settlement alternative have thefollowing items been disclosed? [FASB 150.27]

a. The amount that would be paid, or the number of

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shares that would be issued and their fair value,determined under the conditions specified in thecontract if the settlement were to occur at thereporting date?

b. How changes in the fair value of the issuer's equityshares would affect those settlement amounts (for example, "the issuer is obligated to issue an additionalx shares or pay an additional y dollars in cash for each$1 decrease in the fair value of one share")?

c. The maximum amount that the issuer could berequired to pay to redeem the instrument by physicalsettlement, if applicable?

d. The maximum number of shares that could berequired to be issued, if applicable? [Also see FASB129.05]

e. That a contract does not limit the amount that theissuer could be required to pay or the number of shares that the issuer could be required to issue, if applicable?

f. For a forward contract or an option contract indexedto the issuer's equity shares, the forward price or option strike price, the number of issuer's equity

shares to which the contract is indexed, and thesettlement date or dates of the contract, as applicable?

3. Some entities have no equity instruments outstanding buthave financial instruments in the form of shares, all of which are mandatorily redeemable financial instrumentsrequired to be classified as liabilities. Have those entitiesdisclosed the following: [FASB 150.28]

a. Described those instruments as shares subject tomandatory redemption in statements of financial

position to distinguish those instruments from other liabilities? [FASB 150.19]

b. Presented payments to holders of such instrumentsand related accruals separately from payments to andinterest due to other creditors in statements of cashflows and income? [FASB 150.19]

c. Disclosed the components of the liability that wouldotherwise be related to shareholders' interest and other comprehensive income (if any) subject to theredemption feature (for example, par value and other

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paid-in amounts of mandatorily redeemableinstruments shall be disclosed separately from theamount of retained earnings or accumulated deficit)?[FASB 150.28, FSP FASB 150-2]

4. Have items within the scope of FASB 150 been presentedas liabilities (or as assets in some circumstances) and not

between the liabilities and equity section of the statementof financial position? [FASB 150.18]


F43 FINANCIAL STATEMENTS: COMPARATIVEFINANCIAL STATEMENTS (12/08)

1. Are comparative financial statements presented?Ordinarily, it is desirable that financial statements of twoor more periods be presented. [ARB 43, Ch. 2A.02]

2. With respect to the comparative financial statements presented:

a. Are notes, explanations, and accountants'qualifications that appeared on the statements for the

preceding years repeated, or at least referred to, in the

comparative statements to the extent that theycontinue to be significant? [ARB 43, Ch. 2A.02]

b. Are changes in the manner or basis of presentingcorresponding items for two or more periodsexplained, such as reclassifications? [ARB 43, Ch.2A.02]

c. Are exceptions to comparability disclosed? (Refer toAPB Opinion 20, FASB 154 for informationregarding reporting accounting changes.) [ARB 43,Ch. 2A.03]


G80 GUARANTEES (12/08)FSP No. FAS 133-1 and FIN 45-4, Disclosures

about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of

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G80 GUARANTEES (12/08) the Effective Date of FASB Statement No. 161 , wasissued in September 2008. This section addressesthe amended disclosures for guarantees within thescope of FIN 45. [FSP No. FAS 133-1 and FIN 45-4.02] These disclosure requirements are effectivefor reporting periods (annual or interim) endingafter November 15, 2008. Comparativedisclosures are only required for periods endingsubsequent to initial adoption. Early adoption isencouraged. FIN 45, Guarantor's Accounting and Disclosure

Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others : [FIN 45 and

FSP FIN 45-3]1. Has the entity identified as a guarantee, contracts that

have ANY of the following characteristics (also seeexempted contracts under paragraph 2 below): [FIN 45.03and FSP FIN 45-3]

a. Contracts that contingently require the guarantor tomake payments (either in cash, financial instruments,other assets, shares of its stock, or provision of services) to the guaranteed party based on changes inan underlying that is related to an asset, a liability, or an equity security of the guaranteed party?

b. Contracts that contingently require the guarantor tomake payments (either in cash, financial instruments,other assets, shares of its stock, or provision of services) to the guaranteed party based on another entity's failure to perform under an obligatingagreement (performance guarantees)?

c. Indemnification agreements (contracts) thatcontingently require the indemnifying party(guarantor) to make payments to the indemnified

party (guaranteed party) based on changes in anunderlying that is related to an asset, a liability, or an

equity security of the indemnified party, such as anadverse judgment in a lawsuit or the imposition of additional taxes due to either a change in the tax lawor an adverse interpretation of the tax law?

d. Indirect guarantees of the indebtedness of others, eventhough the payment to the guaranteed party may not

be based on changes in an underlying that is related toan asset, a liability, or an equity security of the

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G80 GUARANTEES (12/08)guaranteed party? [An indirect guarantee of theindebtedness of another arises under an agreementthat obligates one entity to transfer funds to a secondentity upon the occurrence of specified events, under conditions whereby (a) the funds become legallyavailable to creditors of the second entity and (b)those creditors may enforce the second entity's claimsagainst the first entity under the agreement. Examplesof indirect guarantees include agreements to advancefunds if a second entity's net income, coverage of fixed charges, or working capital falls below aspecified minimum.]

e. A guarantee granted to a business or its owner(s) thatthe revenue of the business (or a specified portion of

the business) for a specified period will be at least aspecified amount. [Note: Item (e) was added to FIN45 by FSP FIN 45-3. FSP FIN 45-3 is effective for new minimum revenue guarantees issued or modifiedon or after the beginning of the first fiscal quarter following November 10, 2005.]

2. Has the entity NOT included in contracts identified asguarantees (exempt from the recognition, measurementand disclosure provisions of FIN 45) the followingcontracts: [FIN 45.06]

a. A guarantee or an indemnification that is excluded

from the scope of FASB 5 under paragraph 7 of thatStatement?

b. A lessee's guarantee of the residual value of the leased property at the expiration of the lease term, if thelessee (guarantor) accounts for the lease as a capitallease under FASB 13, Accounting for Leases?

c. A contract that meets the characteristics in paragraph3(a) of FIN 45 but is accounted for as contingent rentunder FASB 13?

d. A guarantee (or an indemnification) that is issued byeither an insurance company or a reinsurancecompany and accounted for under FASB Statements

No. 60, Accounting and Reporting by InsuranceEnterprises; No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-DurationContracts; or No. 120, Accounting and Reporting byMutual Life Insurance Enterprises and by InsuranceEnterprises for Certain Long-Duration ParticipatingContracts (including guarantees embedded in either

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G80 GUARANTEES (12/08)insurance contracts or investment contracts)?

e. A contract that meets the characteristics in paragraph

3(a) of FIN 45 but provides for payments thatconstitute a vendor rebate (by the guarantor) based oneither the sales revenues of, or the number of unitssold by, the guaranteed party? (Vendor rebates basedon the volume of purchases by the buyer would notmeet the characteristics in paragraph 3(a) of FIN 45

because the underlying relates to an asset of the seller,not the buyer who receives the rebates.)

f. A guarantee (or an indemnification) whose existence prevents the guarantor from being able to either account for a transaction as the sale of an asset that isrelated to the guarantee's underlying or recognize inearnings the profit from that sale transaction?

g. A registration payment arrangement within the scopeof FSP EITF 00-19-2, Accounting for RegistrationPayment Arrangements ?

h. A guarantee that is accounted for as a credit derivativeinstrument at fair value under FASB No. 133,

Accounting for Derivative Instruments and Hedging Activities , as described in paragraph 44DD of FASB133?

3. Has the entity recognized a liability at the inception of the

guarantee for the obligation to stand ready to perform for all contracts identified as guarantees except the following(these guarantees are not subject to FIN 45's recognitionand measurement provisions but are subject to itsdisclosure provisions): [FIN 45.07]

a. A guarantee, other than a credit derivative asdescribed in paragraph 44DD of FASB 133, that isaccounted for as a derivative instrument at fair valueunder FASB 133?

b. A guarantee for which the underlying is related to the performance (regarding function, not price) of

nonfinancial assets that are owned by the guaranteed party (e.g., product warranty)? [Note: Thisexemption includes software vendor-licensor contractsthat include an indemnification clause thatindemnifies the licensee against liability and damages(including legal defense costs) arising from anyclaims of patent, copyright, trademark, or trade secretinfringement by the software vendor's software.][FSP FIN 45-1]

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G80 GUARANTEES (12/08)

c. A guarantee issued in a business combination thatrepresents contingent consideration (as addressed in

FASB 141)?d. A guarantee for which the guarantor's obligation

would be reported as an equity item (rather than aliability) under generally accepted accounting

principles (GAAP)?

e. A guarantee by an original lessee that has becomesecondarily liable under a new lease that relieved theoriginal lessee from being the primary obligor (that is,

principal debtor) under the original lease, as discussedin paragraph 38 of FASB 13, as amended?

f. A guarantee issued either between parents and their subsidiaries or between corporations under commoncontrol?

g. A parent's guarantee of its subsidiary's debt to a third party (whether the parent is a corporation or anindividual)?

h. A subsidiary's guarantee of the debt owed to a third party by either its parent or another subsidiary of that parent?

4. For those guarantees recognized under item 3, above, hasthe entity measured the liability for the guarantee at

inception at the greater of (a) fair value or (b) thecontingent liability amount required to be recognized pursuant to paragraph 8 of FASB 5? [FIN 45.10]

5. For guarantee liabilities measured at inception at fair value under item 4, above, was the followingmeasurement guidance considered: [FIN 45.09]

a. If the guarantee was issued in a standalone arm's-length transaction with an unrelated party, was theliability recognized at the inception of the guaranteeequal to the premium received or receivable by theguarantor?

b. If the guarantee was issued as part of a transactionwith multiple elements with an unrelated party (suchas in conjunction with selling an asset or entering intoan operating lease), was the liability recognized at theinception of the guarantee an estimate of theguarantee's fair value? [In this circumstance,guarantors should consider what premium would berequired by the guarantor to issue the same guarantee

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G80 GUARANTEES (12/08)in a standalone arm's-length transaction with anunrelated party. In the absence of observabletransactions for identical or similar guarantees,expected present value measurement techniques as setforth in FASB Concepts Statement 7, will likely

provide the best estimate of fair value. ConceptsStatement 7 states in its glossary that "expected

present value refers to the sum of the probability-weighted present values in a range of estimated cashflows, all discounted using the same interest rateconvention." The general principles in paragraph 41of Concepts Statement 7 are also relevant.]

bb. For entities that have adopted Statement 157 If the guarantee was issued as part of a transaction with

multiple elements with an unrelated party (e.g., inconjunction with selling an asset or entering into anoperating lease), was the liability recognized at theinception of the guarantee an estimate of theguarantee's fair value? [In this circumstance,guarantors should consider what premium would berequired by the guarantor to issue the same guaranteein a standalone arm's-length transaction with anunrelated party as a practical expedient.] Appendix Bof FASB 157 provides guidance on the use of presentvalue techniques.

c. If the guarantee was issued as a contribution to anunrelated party, was the liability recognized at theinception of the guarantee measured at its fair value,consistent with the requirement to measure thecontribution made at fair value, as prescribed in

paragraph 18 of FASB 116?

6. Has the entity recorded the offsetting debit entry uponinitial recognition of the liability at the inception of theguarantee based on the circumstances in which theguarantee was issued, and in determining the offsettingentry, did the entity consider the following examples:[FIN 45.11]

a. If the guarantee was issued in a standalone transactionfor a premium, was the offsetting entry equal to theconsideration received (such as cash or a receivable)?

b. If the guarantee were issued in conjunction with thesale of assets, a product, or a business, were theoverall proceeds (such as the cash received or receivable) allocated between the consideration beingremitted to the guarantor for issuing the guarantee and

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G80 GUARANTEES (12/08)the proceeds from the sale? [That allocation wouldaffect the calculation of the gain or loss on the saletransaction.]

c. If the guarantee were issued in conjunction with theformation of a partially owned business or a ventureaccounted for under the equity method, did therecognition of the liability for the guarantee result inan increase to the carrying amount of the investment?

d. If a residual value guarantee were provided by alessee-guarantor when entering into an operatinglease, was the offsetting entry (representing a paymentin kind made by the lessee when entering into theoperating lease) reflected as prepaid rent, whichwould be accounted for under paragraph 15 of FASB13?

e. If a guarantee were issued to an unrelated party for noconsideration on a standalone basis (that is, not inconjunction with any other transaction or ownershiprelationship), was the offsetting entry an expense?

7. Subsequent to initial recognition of the guarantee liability,has the entity reduced the liability as the entity is releasedfrom risk under the guarantee? [FIN 45.12] [Dependingon the nature of the guarantee, the guarantor's release fromrisk has typically been recognized over the term of theguarantee (a) only upon either expiration or settlement of the guarantee, (b) by a systematic and rationalamortization method, or (c) as the fair value of theguarantee changes (as is done, for example, for guaranteesaccounted for as derivatives). However, the entity shouldnot use 7(c) (fair value) to subsequently account for theguarantee liability unless the use of that method can be

justified under some other GAAP pronouncement (e.g.,FASB 133).] [FSP FIN 45-2]Has the entity complied with the following Issuesdiscussed by the Emerging Issues Task Force, whenapplicable?

EITF 03-12 , Impact of FASB Interpretation No. 45 on Issue No. 95-1 The EITF discussed the application of Interpretation 45 to EITF No. 95-1, Revenue Recognitionon Sales with a Guaranteed Minimum Resale Value . TheTask Force reached a consensus that Interpretation 45does not affect Issue 95-1 because Interpretation 45 doesnot apply to a guarantee for which the underlying isrelated to an asset of the guarantor.

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Yes No NA Comments/ReferencesDisclosure:

G80 GUARANTEES (12/08)

FSP No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133, and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161, wasissued in September 2008. This section addressesthe amended disclosures for guarantees within thescope of FIN 45. [FSP No. FAS 133-1 and FIN 45-4.02] These disclosure requirements are effectivefor reporting periods (annual or interim) endingafter November 15, 2008. Comparativedisclosures are only required for periods endingsubsequent to initial adoption. Early adoption is

encouraged.1. Has the entity disclosed the following information about

each guarantee or each group of similar guarantees(whether or not the guarantee(s) are required to berecognized in the balance sheet under FIN 45 or another standard (e.g., FASB 133)), even if the likelihood of theentity making a payment under the guarantee is remote or the guarantee contract is subject to disclosurerequirements in other standards (e.g., FASB 107 or FASB57): [FIN 45.13]

a. The nature of the guarantee, including theapproximate term of the guarantee, how the guaranteearose, the events or circumstances that would requirethe guarantor to perform under the guarantee, and thecurrent status (that is, as of the date of the statement of financial position) of the payment/performance risk of the guarantee?

(1) For an entity that uses its own internal groupingsfor risk management purposes and as support for its disclosure of the current status of the

payment/performance risk of the guarantee, has italso disclosed how those groupings are

determined and used for managing risk? b. The maximum potential amount of future payments

(

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