Statement of Financial Accounting Standards No. 140 - GASB

Statement of Financial Accounting Standards No. 140 FAS140 Status Page FAS140 Summary Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement No. 125) September 2000 Financial Accounting Standards Board of the Financial Accounting Foundation 401 MERRITT 7, P.O. BOX 5116, NORWALK, CONNECTICUT 06856-5116 Copyright © 2000 by Financial Accounting Standards Board. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Standards Board. Page 2 Statement of Financial Accounting Standards No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments

of Liabilities a replacement of FASB Statement No. 125 September 2000 CONTENTS Paragraph Numbers Introduction and Scope................................................................................................. 1−8 Standards of Financial Accounting and Reporting: Accounting for Transfers and Servicing of Financial Assets............................... 9−15 Recognition and Measurement of Servicing Assets and Liabilities .................. 13 Financial Assets Subject to Prepayment ............................................................ 14 Secured Borrowings and Collateral.................................................................... 15 Extinguishments of Liabilities ................................................................................. 16 Disclosures ............................................................................................................... 17 Implementation Guidance ........................................................................................ 18 Effective Date and Transition ............................................................................ 19−25 Appendix A: Implementation Guidance ................................................................ 26−114 Appendix B: Background Information and Basis for Conclusions...................... 115−341 Appendix C: Illustrative Guidance....................................................................... 342–349 Appendix D: Amendments to Existing Pronouncements..................................... 350–363 Appendix E: Glossary .................................................................................................. 364 Page 3 Copyright ©2000, Financial Accounting Standards Board Not for redistribution FAS 140: Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities a replacement of FASB Statement 125 FAS 140 Summary This Statement replaces FASB Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of Statement 125’s provisions without reconsideration. This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Those standards are based on consistent application of a financial-components approach that focuses on control. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. This Statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. A transfer of financial assets in which the transferor surrenders control over those assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all of the following conditions are met: a. The transferred assets have been isolated from the transferor—put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership. b. Each transferee (or, if the transferee is a qualifying special-purpose entity (SPE), each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no condition both constrains...

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