Regulatory guidance provides a general rule to ensure an institution’s net income is not over-stated by defining that loans (and other assets) should be placed on nonaccrual (1) when the loan (or asset) is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) when payment in full of principal or interest is not expected, or (3) when principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection.

Certain other loans need not be placed on nonaccrual status, such as loans and other assets that have been acquired at a discount and consumer loans. Nevertheless, consistent with the objective to not overstate income, financial institutions should use alternative methods of evaluation to ensure that this objective is met.

a.  Under the first income recognition method, a creditor should accrue interest on the net carrying amount of the impaired loan and report other changes in the net carrying amount of the loan as an adjustment to bad-debt expense.

b.  Under the second income recognition method, a creditor should recognize all changes in the net carrying amount of the loan as an adjustment to bad-debt expense. See FASB ASC 310-10-50-19 for a disclosure requirement related to this method.

If doubt exists as to the collectibility of the remaining recorded investment in an asset placed on nonaccrual status, any payments received must be applied to reduce the recorded investment in the asset to the extent necessary to eliminate such doubt (for example, cost recovery basis).

Loans (or other assets) may be restored to accrual status (using the effective interest rate) when (1) none of its principal and interest is due and unpaid and the institution expects repayment of the remaining contractual principal and interest² or (2) when the loan (or other asset) becomes well secured and in the process of collection.

The FASB ASC glossary defines probable as the future event or events are likely to occur.

The creditor may choose from alternative measurement methods for a collateral dependent impaired loan unless foreclosure is probable, including the, (1) present value of expected future cash flows at the loan’s effective interest rate, (2) observable market price of the loan or (3) the fair value of the collateral.

In certain situations a modified finance lease with a debtor in financial difficulty will result in removal of the finance lease from these loan and lease related schedules. If the restructured finance lease is reclassified as a new operating lease, the operating lease property is reported as an "Other asset" and depreciated.

Previously, for SEC registrants, under Staff Accounting Bulletins (SAB), Topic 5.J., "New Basis of Accounting Required in Certain Circumstances", pushdown accounting generally was permitted when 80 percent or more of an entity’s ownership was acquired, required when 95 percent or more was acquired, and prohibited when less than 80 percent was acquired.

Prior to the issuance of FASB ASU No. 2014-17, GAAP offered limited guidance on pushdown accounting for non-SEC registrants.

SEC SAB No. 115

A change-in-control event occurs when an acquirer obtains a controlling financial interest, as defined under U.S. GAAP, in the acquiree. A controlling financial interest typically requires ownership of more than 50 percent of the voting rights in an acquired entity.

If the holding company forgives payment by the subsidiary of the current portion of the income taxes required on a separate entity basis, the forgiveness is treated as a capital contribution. If the subsidiary pays an amount greater than that required on a separate return basis or if it pays its deferred tax liability in addition to its current tax liability, the institution must report these differences as a cash dividend to the holding company. Failure of the holding company to pay the subsidiary bank an equitable refund of the bank’s net operating loss should also be considered a cash dividend paid by the bank to the parent holding company.

Institutions must disclose the aggregate amount of loans to directors, officers, employees, and stockholders, as well as to entities that directors, officers, employees, and stockholders are affiliated with.

General guidance on related party disclosures is established in FASB ASC 850-10-50

Institutions must disclose extensions of credit to executive officers, directors, principal shareholders, and their related interests.

Banks should consistently report net gains (losses) on the sale of certain others assets, such as foreign currency, as either other noninterest income or as other noninterest expense.