Investment Edge and Agreement Corporations-Annual

DRAFT

10/19/2010

Income Statement

If the Edge or agreement corporation has elected to
apply the fair value option to interest-bearing financial
assets and liabilities, it should report the interest income
on these financial assets (except any that are in nonaccrual status) and the interest expense on these financial
liabilities for the year-to-date in the appropriate interest
income and interest expense items on Schedule RI, not as
part of the reported change in fair value of these assets
and liabilities for the year-to-date. The Edge or agreement corporation should measure the interest income or
interest expense on a financial asset or liability to which
the fair value option has been applied using either the
contractual interest rate on the asset or liability or the
effective yield method based on the amount at which the
asset or liability was first recognized on the balance
sheet. Although the use of the contractual interest rate is
an acceptable method under GAAP, when a financial
asset or liability has a significant premium or discount
upon initial recognition, the measurement of interest
income or interest expense under the effective yield
method more accurately portrays the economic substance of the transaction. In addition, in some cases,
GAAP requires a particular method of interest income
recognition when the fair value option is elected. For
example, when the fair value option has been applied to a
beneficial interest in securitized financial assets within
the scope of Emerging Issues Task Force Issue No. 99-20,
“Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securi-

tized Financial Assets,” interest income should be measured in accordance with the consensus in this Issue.
Similarly, when the fair value option has been applied to
a purchased impaired loan or debt security accounted for
under AICPA Statement of Position 03-3, “Accounting
for Certain Loans or Debt Securities Acquired in a
Transfer,” interest income on the loan or debt security
should be measured in accordance with this Statement of
Position when accrual of income is appropriate.
Revaluation adjustments, excluding amounts reported as
interest income and interest expense, to the carrying
value of all assets and liabilities reported in Schedule RC
at fair value under a fair value option (excluding servicing assets and liabilities reported in Schedule RC, item 8,
“Other assets,” and Schedule RC, item 18, “Other
liabilities,” respectively, and trading assets and trading
liabilities reported in Schedule RC, item 5, ‘‘Trading
assets,’’ and Schedule RC, item 14, ‘‘Trading liabilities,’’
respectively) resulting from the periodic marking of such
assets and liabilities to fair value should be reported as
“Noninterest income: Other” in Schedule RI, item 5(a)(6).
Line item M1 Net change in fair values of financial
instruments accounted for under a fair value option.
Report the net change in fair values of all financial
instruments that the Edge or agreement corporation has
elected to account for under the fair value option that is
included in item 5(a)(6), ‘‘Noninterest income: Other.”

items
and 5(b), "From related organizations."

FR 2886b
Income Statement

March 2009

RI-7

DRAFT

10/19/2010

Schedule RC-N

being in nonaccrual status if: (1) they are maintained on a
cash basis because of deterioration in the financial position of the borrower, (2) payment in full of interest or
principal is not expected, or (3) principal or interest has
been in default for a period of 90 days or more unless the
obligation is both well-secured and in the process of
collection. A nonaccrual asset may be restored to an
accrual status when none of its principal or interest is due
and unpaid or when it otherwise becomes well-secured
and is in the process of collection.
For purposes of applying the third test for the nonaccrual
of interest listed above, the date on which an asset
reaches nonaccrual status is determined by its contractual
terms. If the principal or interest on an asset becomes due
and unpaid for 90 days or more on a date that falls
between report dates, the asset should be placed in
nonaccrual status as of the date it becomes 90 days past
due and should remain in nonaccrual status until it meets
the criteria for restoration to accrual status described
above.
Loans restructured in
A debt is ‘‘well-secured’’
if it is secured (1) by collateral
troubled debt
in the formrestructurings
of liens on, or pledges of, real or personal
property, including securities, that have a realizable value
sufficient to discharge the debt in full, or (2) by the
guarantee of a financially responsible party. A debt is
‘‘in the process of collection’’ if collection of the debt
is proceeding in due course either through legal action,
including judgment enforcement procedures, or, in
appropriate circumstances, through collection efforts that
do not involve legal actions, provided they are reasonably expected to result in repayment of the debt or in its
restoration to a current status.
Restructured For the purposes of this report, restructured
loans and leases are those loans and leases whose terms
have been modified, because of a deterioration in the
financial position of the borrower, to provide for a
reduction of either the interest or principal. Once an
obligation has been restructured because of such credit
problems, it continues to be considered restructured until
paid in full or until such time as the terms are substantially equivalent to terms on which loans with comparable risks are being made. A loan extended or renewed
at a stated interest rate equal to the current interest rate
for new debt with a similar risk is not considered a
restructured loan. Also, a loan to a purchaser of ‘‘other
real estate owned’’ by the reporting corporation for the

purpose of facilitating the disposal of such real estate is
not considered a restructured loan.

Item Instructions
Report in Items 1 and 2 the full outstanding balances (not
just delinquent payments) of loans, lease financing
receivables and any other assets that are past due and
upon which the corporation continues to accrue interest,
as follows:
Line Item 1
accruing.

Past due 30–89 days and still

Report any loans, lease financing receivables and any
other assets that are past due 30–89 days (as defined
above) and still accruing.
Line Item 2
accruing.

Past due 90 days or more and still

Report the loans, lease financing receivables and any
other assets as specified above on which payment is due
and unpaid for 90 days or more.
Exclude from Items 1 and 2 all loans, lease financing
receivables and any other assets that are on a nonaccrual
status.
Line Item 3

Nonaccrual.

Report the outstanding balances of loans, leases and
other assets that are in nonaccrual status. However,
restructured loans and leases with a zero percent effective
interest rate are not to be reported on this line as
nonaccrual loans, leases and other assets.
Item 4

Total.

loans restructured in troubled

Enter the total of Items
through 3.
debt1 restructurings
Memorandum Item 1 Restructured loans and
leases included in Item 4 above.
Include
Report the outstanding balances of restructured loans and
leases (as defined above) that under their modified terms
are past due 30 days or more or are in nonaccrual status
as of the report date. Such loans and leases will have been
included in one or more lines of this schedule. Exclude
from this item all restructured loans to individuals for
household, family and other personal expenditures.

and all loans secured by 1-4 family
residential properties.
RC-N-2

Schedule RC-N

FR 2886b
March 2008