Statements of Position



Download Full Text (2.1 MB)


This proposed Statement of Position (SOP) addresses accounting for differences between contractual and expected future cash flows from an investor's initial investment in certain loans and debt securities (loans) acquired in a transfer when such differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations and would apply to all enterprises. The proposed SOP would limit the yield that may be accreted (accretable yield) to the excess of the investor's estimate of undiscounted expected future principal and interest cash flows (expected future cash flows) over the investor's initial investment in the loan. This SOP would require that the excess of contractual cash flows over expected future cash flows (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. The proposed SOP would also prohibit investors from displaying accretable yield and nonaccretable difference in the balance sheet. The proposed SOP would relate subsequent impairment of the loan to the investor's ability to collect all cash flows expected at acquisition. Subsequent increases in expected future cash flows would be recognized prospectively through adjustment of the loan's yield over its remaining life. The provisions of this proposed SOP would be effective for financial statements issued for fiscal years beginning after June 15, 2000.

Publication Date


Relational Format



Loan sales -- United States -- Accounting


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed statement of position : accounting for discounts related to credit quality;Accounting for discounts related to credit quality; Exposure draft (American Institute of Certified Public Accountants), 1998, Dec. 30



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.