Impairment of a LoanSFAS No. 114, May 1993
“Accounting by Creditors for Impairment of a Loan”
“Accounting by Creditors for Impairment of a Loan”
[asc 310-10-35-16, SFAS 114-pr 8]
A loan is impaired
–> when (a) is probable
(a) all amounts due from a loan will not be collected
[asc 310-10-35-17, SFAS 114-pr 8]
To determine whether a loan is impaired
–> apply (b)
(b) a creditor’s normal loan review procedures
To determine whether a loan is impaired
–> apply (b)
(b) a creditor’s normal loan review procedures
[asc 310-10-35-22, SFAS 114-pr 13]
Impairment loss
= carrying amount of a loan – one of the following
(c) present value of expected future cash flows from a loan
(d) observable market price of a loan
(e) fair value of the collateral: collateral-dependent loan
Impairment loss
= carrying amount of a loan – one of the following
(c) present value of expected future cash flows from a loan
(d) observable market price of a loan
(e) fair value of the collateral: collateral-dependent loan
SEC Staff Accounting Bulletin Topic 6L
“Accounting for loan losses by registrants engaged in lending activities”
SEC SAB Topic 6L
–> provides guidance on the impairment of a loan
–> for SEC registrants
–> provides guidance on the impairment of a loan
–> for SEC registrants