What is FAS 114 called now?
Evaluating FAS 114 (ASC 310-10-35), also known as Accounting Standards Codification Subtopic 310-10, loans for impairment, and identifying the reserve for each one of those individually assessed loans is one of the most critical steps in the allowance for loan lease losses calculations process.
What is asc310?
ASC 310 comprises four Subtopics (Overall, Nonrefundable Fees and Other Costs, Loans and Debt Securities Acquired with Deteriorated Credit Quality, and Troubled Debt Restructurings by Creditors). Below is an overview of each Subtopic.
What is fas115?
115, Accounting for Certain Investments in Debt and Equity Securities, commonly known as “FAS 115”, is an accounting standard issued during May 1993 by the Financial Accounting Standards Board (FASB), which became effective for entities with fiscal years beginning after December 15, 1993.
How do you calculate impairment of a loan?
Generally, a loan is impaired for the purposes of FAS 114 if it exhibits the same level of weaknesses and probability of loss as loans or portfolio of loans classified as doubtful or loss within their portfolio.
What is a homogeneous loan?
Homogeneous Loan Pools means groups of loans sharing common risk factors.
What constitutes a troubled debt restructure?
A troubled debt restructuring (TDR) is defined as a debt restructuring in which a creditor, for economic or legal reasons related to a debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.
Is allowance for doubtful accounts required by GAAP?
The primary ways of estimating the allowance for bad debt are the sales method and the accounts receivable method. According to generally accepted accounting principles (GAAP), the main requirement for an allowance for bad debt is that it accurately reflects the firm’s collections history.
Is the allowance method required by GAAP?
Generally accepted accounting principles (GAAP) require that companies use the allowance method when preparing financial statements. In the direct write-off method, a company will not use an allowance account to reduce its Accounts Receivable.
What is a good non performing loan ratio?
The non-performing loans to loans ratio is calculated by adding 90+ day late loans (and still accruing) to nonaccrual loans, and then dividing that total by the total amount of loans in the portfolio. Portfolios with fewer than 6% non-performing loans are deemed healthy.
What is a TDR loan?
Loan modifications A TDR occurs when a financial institution restructures a debt and, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider.