Accounting dilemma under the existing Indian GAAP Under Indian Generally Accepted Accounting Principles (GAAP), while there is no direct reference to the treatment to be given for expenditure incurred on such ‘enabling assets’, the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) has dealt with the same 1.ASC 860-10-20 and Statement of Financial Accounting Standards No. I would like to receive periodic news, reports, and invitations from Duff & Phelps. I believe it is FAS 65 that directs banks to maintain assets at "fair value". The guidance in the Update is effective for the first interim or annual period beginning on or after December 15, 2011 (2012 for calendar year-end companies; the "Effective Date") and should be applied prospectively to transactions or modifications of existing transactions for both publicly traded and private entities. The fair value of a foreclosed asset may also increase later, and, thus, a gain should be recorded as a credit. In addition, any payment due to the financing customer should be recorded as a credit in Account 220, Accounts Receivable-Customers .

Foreclosure disposition refers to the sale of a foreclosed asset. 55 East 52nd Street In general, the accounting entries would record a debit to foreclosed asset and a credit to the loan outstanding. Existence of those criteria will continue to indicate that the repo party has maintained effective control of the transferred assets and must account for the transaction as a secured borrowing. The three other criteria applicable to the assessment of effective control are not changed by the ASU. It is my understanding we take our best estimate of fair value at foreclosure/repossesion and hit the ALLL with the loss. The bank will recognize only a partial gain or loss in proportion to the cash received thus far and record the balance of the gain or loss as deferred. The sales treatment allowed LBHI to use the cash received from these repos to repay other liabilities, which resulted in the appearance that LBHI was less levered than it actually was at the time. I love these accounting pronouncements almost as much as I like HMDA/CRA.

If the fair market value of the foreclosed assets is higher or lower than the amount of loan outstanding at the time of the foreclosure, the foreclosure generates a gain or loss, recorded as a credit or debit, respectively.


Under existing accounting guidance, four conditions must all be met for a repurchase agreement to qualify as a secured borrowing, wherein the transferred assets remain on the repo party's books. The entire ASU 2011-3 can be found at the following link: ASU 2011-03. Duff & Phelps was the lead financial advisor to Anton Valukas, Chairman of Jenner & Block, in connection with his role as Examiner in the Lehman bankruptcy, the largest such case in U.S. history. Accounting for in-substance foreclosures. However, to be considered as a sale, the buyer’s investment must be adequate to demonstrate a commitment to pay for the property. International Accounting Standards ("IAS") 39 does not require the consideration of a transferor's ability to repurchase or redeem financial assets transferred on substantially agreed terms, even in the event of default by the transferee, in determining the maintenance of effective control over the transferred assets. Location From bankers. Is there some type of timeframe that comes into play here? With seller financing, a bank that sells the foreclosed asset would record a debit to loan receivable as an asset on its balance sheet.

Accounting entries would debit loss on impairment and credit the related foreclosed asset. Duff & Phelps is headquartered in New York with offices around the world. from bankers. When a bank forecloses on a property that is the collateral of its loan, it effectively acquires the foreclosed asset and releases the borrower from his payment obligation by writing off the defaulted loan. Otherwise, such assets are reclassified as held and used with recognition of depreciation expense. Read more. The ASU removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance guidance related to that criterion. This is not GAAP. But, in general, all assets must be at fair value and once at fair value, any additional loss should be expensed, not charged to the ALLL.


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