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AFS Debt Security Credit Loss CalculatorFair Value Floor (ASC 326-30)

What do the numbers come to once the work is shown?

Allowance for credit losses limited to the amount fair value is below amortized cost, with the non-credit loss to OCI.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Allowance for credit losses
$60,000
Limited to the unrealized loss
Credit loss expense (reversal) this period
$40,000
Non-credit loss in OCI
$40,000
Drawn to one scale
Allowance for credit losses$60,000
Credit loss expense (reversal) this period$40,000
Non-credit loss in OCI$40,000
Credit loss before the fair value floor$60,000
All results
MeasureResult
Allowance for credit losses$60,000
Credit loss expense (reversal) this period$40,000
Non-credit loss in OCI$40,000
Credit loss before the fair value floor$60,000
How this was worked out
Work shownrecomputed as you type
Credit loss = amortized cost - PV of expected cash flows
Allowance = min(credit loss, amortized cost - fair value)
OCI = unrealized loss - allowance
Intent or requirement to sell: write off the allowance, write amortized cost down to fair value; earnings take the write-down less the allowance

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Credit loss = amortized cost - PV of expected cash flows
  • Allowance = min(credit loss, amortized cost - fair value)
  • OCI = unrealized loss - allowance
  • Intent or requirement to sell: write off the allowance, write amortized cost down to fair value; earnings take the write-down less the allowance

How it works

ASC 326-30-35-2, added by ASU 2016-13, records credit losses on available-for-sale debt securities through an allowance, limited by the amount fair value is below amortized cost. Impairment not recorded through the allowance goes to OCI net of tax.

Under ASC 326-30-35-10, if the entity intends to sell, or more likely than not will be required to sell before recovery, it writes off any allowance and writes the amortized cost basis down to fair value, with any incremental impairment reported in earnings.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Is there an allowance when fair value is above amortized cost?

No. The fair value floor makes the allowance zero.

Can the allowance reverse?

Yes. Improvements in expected cash flows reduce the allowance through credit loss expense.

Which rate discounts the expected cash flows?

The security's effective interest rate implicit at the date of acquisition.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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