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Reporting reset – Loans, receivables, and investments · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought leadership from PWC's National Office.
• 0:06
  SPEAKER_01: Hello, and welcome to PWC's Accounting Podcast.
• 0:11
  SPEAKER_01: I'm Heather Horn.
• 0:12
  SPEAKER_01: Today we're continuing our series on financial statement presentation and disclosure, focusing on loans, receivables, and investments.
• 0:21
  SPEAKER_01: Key areas that impact nearly every business.
• 0:27
  SPEAKER_01: Our guest for today is Catherine Espino, a partner in PwC's National Office, who's back on the podcast to share her deep experience advising clients and engagement teams on these topics.
• 0:39
  SPEAKER_01: Joining Catherine to lead the discussion is our guest host, Kyle Moffitt, professional practice group leader in PwC's National Office.
• 0:47
  SPEAKER_01: With that, let's listen to the episode.
• 0:51
  SPEAKER_04: Catherine, thanks for joining me today to discuss financial statement presentation of loans, receivables, and investments.
• 0:57
  SPEAKER_04: These are key areas that impact nearly every business.
• 1:01
  SPEAKER_04: I want to dive right in.
• 1:02
  SPEAKER_04: I think it might be best, obviously, for us to separate kind of the discussion into two parts.
• 1:07
  SPEAKER_04: First, we focus on loans and receivables, and then we can focus on investments, which will include debt securities and equity securities.
• 1:15
  SPEAKER_02: Sounds great, Kyle.
• 1:16
  SPEAKER_02: Thanks for having me.
• 1:16
  SPEAKER_02: And I'm just, I'll say this up front.
• 1:18
  SPEAKER_02: I'm probably going to say it a few more times as we chat.
• 1:21
  SPEAKER_02: Um, I'm going to go over a lot of the presentation uh and disclosure requirements, but it's not an all comprehensive list.
• 1:27
  SPEAKER_02: So definitely refer, I'll refer our listeners to the financial statement presentation guide for kind of the comprehensive list of requirements as well as the linkage into all of the codification, you know, relevant codification, et cetera.
• 1:38
  SPEAKER_04: No, I think that's a great, great reference.
• 1:40
  SPEAKER_04: And I think I can tell you that when I when I joined you know PwC from the SEC, started reviewing filings, like you kind of that's kind of a first first place to go for me.
• 1:51
  SPEAKER_04: Just gives you everything you need.
• 1:52
  SPEAKER_04: And then of course you can then go into the details.
• 1:54
  SPEAKER_04: You can read the standard, but I think that's great to ground it in, hey, look, this is a good, a good thing for you to look at to guide on kind of what to think about the requirements uh moving forward.
• 2:04
  SPEAKER_04: So so let's start with loans and receivables.
• 2:07
  SPEAKER_04: What are some of the key presentation requirements?
• 2:09
  SPEAKER_02: Sure.
• 2:10
  SPEAKER_02: So almost every reporting entity has some loans and receivables, right?
• 2:14
  SPEAKER_02: They may be the nature may depend based on the nature of the business.
• 2:17
  SPEAKER_02: So you may have your normal kind of trade receivables from customers, or if you're a bank, you may have loans out to customers.
• 2:24
  SPEAKER_02: So, but almost every entity has some level of accounts receivable or loans.
• 2:28
  SPEAKER_02: In terms of the accounting guidance, ASC 310, which is titled Receivables, is the primary guidance that's gonna cover our loans and receivables, including the presentation and disclosure requirements.
• 2:38
  SPEAKER_02: And given that our loans and receivables and investments are all financial instruments, we're also gonna touch on the guidance that's in ASC 825 relating to financial instruments.
• 2:49
  SPEAKER_02: There are other, as I mentioned, presentation and disclosure requirements, probably most notably for loans and receivables that are held at fair value, as well as relating to credit losses and the ASC 326 standard.
• 3:00
  SPEAKER_02: We're not gonna cover those, but again, FSP guide is your reference for a lot more information to get into.
• 3:06
  SPEAKER_02: Exactly.
• 3:06
  SPEAKER_03: A little more challenging.
• 3:07
  SPEAKER_03: Yeah.
• 3:08
  SPEAKER_02: So I'll start with the balance sheet presentation of loans and receivables.
• 3:11
  SPEAKER_02: And overall, this guidance really primarily addresses the level of aggregation that's required or allowed on the face of the balance sheet.
• 3:19
  SPEAKER_02: So for all companies, financial assets are required to be separately presented by measurement category.
• 3:24
  SPEAKER_02: So think amortized cost versus fair value and form of financial assets.
• 3:28
  SPEAKER_02: So loan versus security is an example.
• 3:31
  SPEAKER_02: And that's required either on the face of the balance sheet or in the notes to the financial statements.
• 3:35
  SPEAKER_02: Loans and receivables can be presented on a single line item on the face of the balance sheet, but any loans held for sale are required to be separately presented.
• 3:43
  SPEAKER_02: And then any major categories of loans and receivables should be separately presented either again on the face of the balance sheet or in the notes.
• 3:51
  SPEAKER_02: And the type of those major categories of loans and receivables, again, will depend on the nature of what you have.
• 3:56
  SPEAKER_02: But for example, if an entity has a portfolio of loans, you may see that they disclose separately commercial loans from consumer loans.
• 4:03
  SPEAKER_02: And then if you have assets that are measured at fair value and similar assets that are measured at amortized cost, those must be presented separately on the face of the balance sheet.
• 4:13
  SPEAKER_02: And you can do that in one of two ways.
• 4:14
  SPEAKER_02: You can either present it in a single line item with a parenthetical disclosure with the amount that's carried at fair value, or you can put it in two separate line items.
• 4:22
  SPEAKER_02: And where you'll typically see that in the loans and receivables space is if an entity has elected the fair value option for certain loans or receivables, you'll see that uh necessary disclosure.
• 4:33
  SPEAKER_04: Um I think the the other thing I think for for people to keep in mind too, right, is in preparing the financial statements is obviously there are almost always incremental SEC disclosure requirements.
• 4:44
  SPEAKER_04: Can you talk a little bit about those?
• 4:46
  SPEAKER_02: Yeah, absolutely.
• 4:46
  SPEAKER_02: And there are incremental requirements.
• 4:48
  SPEAKER_02: And so I'll touch on just a couple um examples.
• 4:51
  SPEAKER_02: And these are for commercial and industrial companies that are subject to Article V of Regulation SX.
• 4:56
  SPEAKER_02: And again, primarily relate to the level of aggregation in your financial statements.
• 5:01
  SPEAKER_02: So for example, Reg SX requires uh SEC registrants to separately disclose either on the face of the balance sheet or in the notes, again, receivables from customers, so your normal trade receivables, receivables from related parties, and receivables from underwriters, promoters, and employees other than those related parties that arose in a manner other than the ordinary course of business, and then any other receivables that you have.
• 5:24
  SPEAKER_02: And then an example of another incremental disclosure is any amount that's in excess of five percent of total assets must be uh separately presented on the face of the balance sheet or in the notes for SEC received.
• 5:35
  SPEAKER_04: I think that's a little bit of a sleeper one too, right?
• 5:37
  SPEAKER_04: Yeah, absolutely.
• 5:37
  SPEAKER_04: I think people tend to miss that.
• 5:39
  SPEAKER_02: Yep, agree.
• 5:40
  SPEAKER_02: And then additionally, uh, if the aggregate amounts of notes receivable exceeds 10% of your aggregate receivables, those notes receivables must be separately disclosed.
• 5:50
  SPEAKER_04: Um so I appreciate you kind of you know mentioning that it was we are looking at Article 5 versus like Article 9, which covers bank holding companies.
• 5:58
  SPEAKER_04: So I mean we'll get to some of the nuances, um, but we're not gonna get into the weeze on that.
• 6:02
  SPEAKER_04: We're really focused on kind of commercial, commercial entities and industrial companies.
• 6:06
  SPEAKER_04: So appreciate you clarifying that.
• 6:08
  SPEAKER_04: Um are there any other key considerations when presenting loans and receivables on the balance sheet?
• 6:12
  SPEAKER_02: Yeah, maybe just one other point that I'll touch on quickly.
• 6:15
  SPEAKER_02: Um, and this is related to the presentation of deferred loan origination fees and costs, as well as any other purchase premiums and discounts that you may have on your receivables.
• 6:24
  SPEAKER_02: So the unamortized balance of those loan origination fees and costs as well as the purchase premiums and discounts that are being recognized as an adjustment to your yield, that unamortized balance must be reported on the balance sheet as part of the loan or receivable balance to which it relates.
• 6:40
  SPEAKER_04: That's that's helpful.
• 6:41
  SPEAKER_04: Now, turning to the income statement, what are the key presentation considerations for loans and receivables to keep in mind?
• 6:48
  SPEAKER_02: Yeah, so really limited guidance in terms of income statement presentation.
• 6:51
  SPEAKER_02: So just two points that I'll touch on here.
• 6:54
  SPEAKER_02: First, the amortization of those deferred loan origination fees and costs and the premiums and discounts that are recognized as an adjustment to your effective interest rate are required to be reported through interest income.
• 7:05
  SPEAKER_02: And then secondly, commitment fees that are amortized on a straight line basis over the commitment period or that are recognized in net income when that commitment expires are required to be reported as service fee income.
• 7:17
  SPEAKER_02: Gotcha.
• 7:18
  SPEAKER_04: Gotcha.
• 7:18
  SPEAKER_04: So that's helpful.
• 7:19
  SPEAKER_04: I think you know when let's turn now to disclosure requirements.
• 7:23
  SPEAKER_04: You know, what should companies be thinking about in this space?
• 7:26
  SPEAKER_02: Yeah, absolutely.
• 7:27
  SPEAKER_02: So I'll again I'll go through kind of the primary disclosure requirements, but refer back to that FSP guide for the comprehensive list.
• 7:33
  SPEAKER_04: There's a lot.
• 7:34
  SPEAKER_04: Yep.
• 7:34
  SPEAKER_02: There are a lot.
• 7:35
  SPEAKER_02: So ASC310, again, our you know, governing receivables, requires that companies disclose their significant accounting policies for all loans and receivables.
• 7:44
  SPEAKER_02: And so that disclosure should include your basis of accounting for loans and receivables, the method used for determining the lower of cost or market for loans that are held for sale, and then the method for recognizing interest income, which should also include your policy relating to the deferred fees and costs and purchase premiums and discounts.
• 8:01
  SPEAKER_02: And then, as we mentioned earlier, if major categories of loans and receivables are not presented on the balance sheet separately, you'll require to disclose those in the footnotes.
• 8:10
  SPEAKER_02: And then finally, and this is for public business entities only, um, the ASCA25 governing financial instruments requires that public business entities disclose the fair value of all financial instruments.
• 8:23
  SPEAKER_02: And there's a few listed exceptions.
• 8:24
  SPEAKER_02: The one most relevant to what we're talking about is our trade receivables that are due within less than a year.
• 8:29
  SPEAKER_02: So those are excluded from that requirement, but again, just for public business entities.
• 8:33
  SPEAKER_04: That's helpful.
• 8:34
  SPEAKER_02: Yeah.
• 8:34
  SPEAKER_04: So so shifting to loan modifications, obviously, the where where we are right now, um, and I think we've been this way since COVID.
• 8:42
  SPEAKER_04: I mean, it just seems like it's a never-ending cycle of uncertainty.
• 8:46
  SPEAKER_04: Um, loan modifications for borrowers that are facing financial difficulty.
• 8:50
  SPEAKER_04: So there's new accounting guidance for troubled debt restructurings that's now in effect.
• 8:55
  SPEAKER_04: Um, how is the approach to accounting for these modifications changed and what does that mean for financial reporting?
• 9:00
  SPEAKER_04: What do the financial statements look like?
• 9:01
  SPEAKER_04: What's that impact?
• 9:02
  SPEAKER_02: Yeah, absolutely.
• 9:02
  SPEAKER_02: And so this was a a change that came through ASU 202202.
• 9:07
  SPEAKER_02: And that guidance really eliminated the concept of a troubled debt restructuring for creditors.
• 9:12
  SPEAKER_02: And important to know that this is only for creditors, not for the borrower-debtor side of the transaction.
• 9:17
  SPEAKER_02: Um it eliminated the idea of trouble debt restructuring, but it introduced new disclosure requirements for certain modifications.
• 9:24
  SPEAKER_02: And so those modifications that uh are applicable or subject to this guidance are for modifications with borrowers experiencing financial difficulty that result in direct changes to the timing and amount of contractual cash flows.
• 9:36
  SPEAKER_04: Sounds easy to figure that one out, right?
• 9:40
  SPEAKER_02: I think uh yeah, we kept the concept of financial difficulty and then uh added this concept of direct changes to uh timing and amounts of cash flows.
• 9:47
  SPEAKER_02: So how we typically see the types of modifications that that relate here.
• 9:51
  SPEAKER_02: So principal forgiveness, interest rate reductions, other than insignificant payment delays, term extensions, or any combination of those.
• 10:00
  SPEAKER_02: Um those modifications, those types of modifications are generally subject to these disclosure requirements.
• 10:05
  SPEAKER_02: And then I'll say since the concept of a concession was removed uh along with the idea of trouble debt restructurings, the disclosures um are required for modified loans with borrowers experiencing financial difficulty, regardless of whether that modification is considered a concession, as it was defined in the previous guidance.
• 10:22
  SPEAKER_02: And that that is a bit of a change.
• 10:24
  SPEAKER_02: Um so that is that modifications of loans with borrowers experiencing financial difficulty that may not have been considered concessions before and therefore not accounted or disclosed as TDRs may now be included within the new required disclosures.
• 10:38
  SPEAKER_04: Can you give an example of that?
• 10:39
  SPEAKER_02: Yeah, absolutely.
• 10:40
  SPEAKER_02: So if a creditor lowers the interest rate on a loan to a you know with a borrower experiencing financial difficulty, and in return for that interest rate reduction, the creditor receives additional collateral from the borrower.
• 10:51
  SPEAKER_02: That would not have been considered a concession under the previous guidance because the creditor got that collateral in return.
• 10:57
  SPEAKER_02: However, under the new gap, that would meet the requirement for these disclosures since you did have a change to the timing and amount of your uh cash flows.
• 11:05
  SPEAKER_02: Um and again, I that's an important point that the new guidance is direct changes to the timing and amount of cash flows.
• 11:12
  SPEAKER_02: So modifications like changes to covenants or covenant waivers are not included in these disclosures.
• 11:17
  SPEAKER_02: Gotcha.
• 11:17
  unknown: Gotcha.
• 11:18
  SPEAKER_04: That is a very helpful overview.
• 11:20
  SPEAKER_04: And one of the things you mentioned early on was the new guidance does introduce incremental disclosures.
• 11:25
  SPEAKER_04: You walk through kind of what the key requirements are there.
• 11:28
  SPEAKER_02: Yeah, absolutely.
• 11:28
  SPEAKER_02: And so overall, the disclosures were designed to provide users with information about the types of modifications that a company has made, um, the magnitude of those modifications, and the degree of success those modifications have with um mitigating any potential credit losses.
• 11:44
  SPEAKER_02: So, in terms of specific disclosures, entities are required to disclose qualitative and quantitative details about the modification.
• 11:51
  SPEAKER_02: So that includes the total amortized cost basis of the modified loans, the financial impact of the modification, and the borrower's performance post-modification.
• 12:00
  SPEAKER_02: And it's also important to mention that if a um if a receivable is modified in more than one way.
• 12:06
  SPEAKER_02: So if you give a borrower an interest rate reduction as well as you know have forgiven some of the principal, your the guidance requires you to put that modification into a separate category.
• 12:14
  SPEAKER_04: Right.
• 12:15
  SPEAKER_04: So so you you say companies need to report the borrower's performance post-modification.
• 12:20
  SPEAKER_04: What do you mean by that?
• 12:21
  SPEAKER_02: Yeah, so two things.
• 12:22
  SPEAKER_02: Companies need to disclose the performance of the modified loan in the 12 months after the modification.
• 12:28
  SPEAKER_02: And so that's generally in the form of a table where you'll see the amortized cost basis of the modified loans by payment status.
• 12:34
  SPEAKER_02: So is it current, is it 30 days past due, et cetera?
• 12:37
  SPEAKER_02: And then there's also additional qualitative and quantitative disclosures for loans that have payment defaults in the current period that have been modified within the previous 12 months.
• 12:47
  SPEAKER_02: And again, that's that's to give the users of the financial statements some idea of the post-modification performance of those loans.
• 12:53
  SPEAKER_02: And then maybe just a final kind of disclosure requirement is that um creditors are required to disclose the amount of any additional commitments to lend money to those borrowers that they've already experiencing financial difficulty for which they've modified their loans previously.
• 13:07
  SPEAKER_04: Yeah, I think that's a great point.
• 13:09
  SPEAKER_04: That's a great point.
• 13:10
  SPEAKER_04: Anything else to add there?
• 13:11
  SPEAKER_04: Or we uh I I think look, I think that's a lot obviously to unpack.
• 13:15
  SPEAKER_04: I you mentioned that that you know you hope that this wasn't gonna be but uh boring for our listeners, but but I think it's it's it's spot on and it it's really it, you know, it's enough detail for people to understand what's what's gonna be required as it relates to loans and receivables.
• 13:29
  SPEAKER_04: So kind of you know, switching gears now to think about the second part of the conversation, and it's all about investments, right?
• 13:35
  SPEAKER_04: Where should we start?
• 13:36
  SPEAKER_02: Yeah, so I'll give a quick overview of the guidance that we're gonna reference here.
• 13:40
  SPEAKER_02: So ASC320 governs your investments in debt securities, and then ASC321, your investments in equity securities.
• 13:47
  SPEAKER_02: Again, those are both financial instruments.
• 13:49
  SPEAKER_02: So we'll touch on some of the guidance and requirements for financial instruments, other information in ASC 820 for those investments at fair value and credit losses.
• 13:58
  SPEAKER_02: We will leave that for a different time and have everyone look at the FSB guide.
• 14:02
  SPEAKER_04: Because I will fall asleep with listening.
• 14:04
  SPEAKER_02: Yes, yes.
• 14:05
  SPEAKER_02: Um, so first maybe I'll cover the balance sheet presentation for debt and equity securities together because they have many of the same requirements.
• 14:11
  SPEAKER_02: But for debt securities, the presentation on the balance sheet will depend on the classification of the security.
• 14:16
  SPEAKER_02: So that's whether it's classified as trading, available for sale, or held to maturity.
• 14:20
  SPEAKER_02: Trading securities are uh and available for sale securities are presented at fair value on the balance sheet, while held to maturity securities are presented at amortized cost.
• 14:30
  SPEAKER_02: And then moving to equity securities, equity securities are required to be measured at fair value.
• 14:34
  SPEAKER_02: That is, unless there's an equity security that doesn't have a readily determinable fair value, a company has uh an election to use a measurement alternative, in which case that equity security would be measured at cost less impairment, unless there's an observable transaction during the period, in which case it would be marked to fair value.
• 14:50
  SPEAKER_02: So generally, equity security is at fair value.
• 14:53
  SPEAKER_02: Um, again, these are similar to what we talked about with loans and receivables.
• 14:56
  SPEAKER_02: For all companies, uh financial assets are required to be separately presented by measurement category and form of financial asset.
• 15:03
  SPEAKER_02: And then here, if you have assets that are um similar to loans and receivables, when you have assets that are measured at fair value and amortized cost, similar assets, you need that separate presentation on the face of the balance sheet, either through the parenthetical disclosure or the separate line items.
• 15:17
  SPEAKER_02: And then for public companies, two additional requirements that I'll mention.
• 15:20
  SPEAKER_02: Always the first uh is one we already talked about, but the um relating to disaggregation, but any amount in excess of five percent of total assets needs to be presented separately.
• 15:30
  SPEAKER_02: And then finally, uh specifically related to your debt and equity securities, public companies are required to disclose the amortized cost of securities that are measured at fair value, and likewise the fair value for securities that are measured at amortized cost.
• 15:44
  SPEAKER_04: Right.
• 15:44
  SPEAKER_02: So that's just just for public companies.
• 15:46
  SPEAKER_04: Yep.
• 15:46
  SPEAKER_04: So let's turn to the income statement presentation.
• 15:49
  SPEAKER_04: How are debt securities typically presented and what considerations should our listeners keep in mind?
• 15:54
  SPEAKER_02: Yeah.
• 15:55
  SPEAKER_02: So I again limited uh specific guidance on income statement presentation, but I'll cover a few points on the recognition and presentation of your unrealized gains and losses.
• 16:05
  SPEAKER_02: And again, for debt securities, this goes back to classification as trading available for sale or held to maturity.
• 16:10
  SPEAKER_02: Trevor Burrus, Jr.
• 16:10
  SPEAKER_04: And DICE is not gonna, the desegregated income statement project is not gonna help with providing more certainty as to where what should be presented.
• 16:18
  SPEAKER_04: I'm saying exactly yes, no.
• 16:21
  SPEAKER_02: So here for trading securities, which are reported at fair value, the unrealized gains and losses are recognized in net income.
• 16:28
  SPEAKER_02: But there's no specific guidance as to which line item those must be presented in.
• 16:32
  SPEAKER_02: But what we typically see is line items titled trading gains and losses, or you may see those gains and losses in other income.
• 16:39
  SPEAKER_02: But again, other presentation could be appropriate.
• 16:41
  SPEAKER_02: For AFS securities, which are also reported at fair value, the unrealized gains and losses are reported in accumulated other comprehensive income as a separate component of stockholders' equity.
• 16:51
  SPEAKER_02: So a bit different than your trading securities.
• 16:53
  SPEAKER_02: And then for HTM securities, those are at amortized costs and no reporting of unrealized gains and losses.
• 16:59
  SPEAKER_02: And then one other point that I'll mention, um, similar to what we talked about with loans and receivables, uh, the guidance specifies that the amortization of your premiums and discounts on your securities, as well as any other deferred fees and costs, should be recognized as an adjustment to your effective interest rate and included in interest income on your income statement.
• 17:16
  SPEAKER_04: Yeah, great, great point there.
• 17:18
  SPEAKER_04: Um the thing that I always when when thinking about you you were talking about some of the presentation, and I think it's important, right, that that companies are like paying attention to where things are presented because the FCC will review and issue comments and sometimes say, like, why is it being presented in this particular line item?
• 17:37
  SPEAKER_02: Absolutely.
• 17:37
  SPEAKER_04: Um and so we you know we see that comment quite often.
• 17:39
  SPEAKER_02: Yeah.
• 17:40
  SPEAKER_02: It goes back to the transparency for your readers, right?
• 17:42
  SPEAKER_02: Like um, making sure that you have that that transparency in either your your you know balance sheet income statement or in your notes.
• 17:49
  SPEAKER_04: Right, right.
• 17:49
  SPEAKER_04: Yeah.
• 17:50
  SPEAKER_04: So classification is is obviously the the a big point.
• 17:53
  SPEAKER_04: It's gonna dictate your your income statement presentation, a disclosure here.
• 17:57
  SPEAKER_04: How about the income statement presentation for equity securities?
• 18:00
  SPEAKER_02: Yep.
• 18:00
  SPEAKER_02: So again, limited guidance, but we just talked about equity securities generally at fair value, if not under that measurement alternative.
• 18:07
  SPEAKER_02: So very similarly, unrealized gains and losses on your equity securities and also any dividend income on your equity securities are typically classified as trading gains and losses or other income.
• 18:18
  SPEAKER_02: Again, could be somewhere else, but that's what we typically see.
• 18:21
  SPEAKER_04: And and then regarding disclosures, starting with debt securities again, what are the key requirements?
• 18:27
  SPEAKER_02: Yep.
• 18:27
  SPEAKER_02: So generally the disclosures are required to be um segregated by classification again for our debt securities.
• 18:33
  SPEAKER_02: And it really highlights the information about the types and terms of the securities that are held.
• 18:39
  SPEAKER_02: And then many of the investment disclosures for our debt securities, particularly for our AFS and HTM classified debt securities, are required to be presented by major security type.
• 18:49
  SPEAKER_04: Can you talk about maybe provide some examples for our listeners on that?
• 18:53
  SPEAKER_02: Absolutely.
• 18:53
  SPEAKER_02: So it's basically a further disaggregation based based on the nature and risk of the security.
• 18:59
  SPEAKER_02: So as an example, and one that we would typically see, you may likely present separately your US Treasury securities from corporate debt securities from asset backed securities, given the difference in the nature and the risks associated with each of those debt securities.
• 19:15
  SPEAKER_02: Gotcha.
• 19:15
  SPEAKER_04: So so for available for sale, health and maturity securities, what are the disclosures that are required for the major security types there?
• 19:23
  SPEAKER_02: Yep.
• 19:23
  SPEAKER_02: So I'll go through a list and I'll start with our list of AFS securities.
• 19:28
  SPEAKER_02: So first is the amortized cost basis.
• 19:30
  SPEAKER_02: Yep.
• 19:30
  SPEAKER_02: Aggregate fair value, total allowance for credit losses, total gains for securities with net gains in AOCI, and total losses for securities with net losses in AOCI, and then information about contractual maturities of your securities.
• 19:45
  SPEAKER_02: And then also for AFS securities, uh, entities are required to disclose the change in your unrealized gains and losses that are reported in AOCI during the period, and the amount of gains and losses that were reclassed out of AOCI into net income due to the sale of that security.
• 20:01
  SPEAKER_02: And then similarly for our health and maturity securities, uh, by major security type, you need to disclose the amortized cost basis, the aggregate fair value for public business entities only, total allowance for credit losses, gross unrealized holding gains and losses, again, PBEs only, net carrying amount, and then again, information about the contractual maturities of your securities.
• 20:25
  SPEAKER_04: Yeah, a lot, a lot there to unpack, but you know, certainly can understand why those disclosures are all relevant to the readers of the financial statements.
• 20:33
  SPEAKER_04: And again, right, I do want to reiterate classification plays a key role in really determining the disclosure requirements.
• 20:40
  SPEAKER_04: Um, any other important disclosures that we haven't covered?
• 20:43
  SPEAKER_02: Yeah, maybe just a two that I'll mention, but we've talked about AFS and HTM securities for our trading securities.
• 20:49
  SPEAKER_02: Uh, our trading debt securities classified as trading, gains and losses on those trading securities that are still held at the balance sheet date need to be disclosed.
• 20:57
  SPEAKER_02: And then there are also other specific disclosures for when you have a sale of an AFS security or if you have a um change in classification from your debt securities, um, additional disclosure requirements there.
• 21:09
  SPEAKER_04: Yeah.
• 21:09
  SPEAKER_04: Yeah.
• 21:09
  SPEAKER_04: So what about equity securities?
• 21:11
  SPEAKER_02: Yeah.
• 21:12
  SPEAKER_02: So for equity securities, there is specific guidance where reporting entities need to disclose the amount of unrealized gains and losses uh for all equity securities at the measurement date, but are still held at the measurement date, regardless of the measurement model.
• 21:24
  SPEAKER_02: So that's for all equity securities, regardless of fair value or measurement alternative.
• 21:29
  SPEAKER_02: And then there are also incremental disclosures for those equity securities that are uh measured under that measurement alternative.
• 21:35
  SPEAKER_02: Um and I won't go through the list there, but refer to those be guy there.
• 21:41
  SPEAKER_04: It's perfect for another podcast.
• 21:43
  SPEAKER_04: Exactly.
• 21:43
  SPEAKER_04: Um look, going through all of these disclosure requirements, again, it it all comes back to the importance of the accounting model use, the classification, right?
• 21:51
  SPEAKER_04: I I do want to reiterate the importance of, hey, you know, there is guidance out there for nature statement presence.
• 21:57
  SPEAKER_04: There's a lot out there that you can look to.
• 22:00
  SPEAKER_04: Um, you know, as we wrap up, any final key takeaways on on these disclosures, investment disclosures?
• 22:06
  SPEAKER_02: Yeah, I think similar to what you just mentioned, Kyle, that it there's a lot of them, right?
• 22:10
  SPEAKER_02: So make sure you understand what all the required presentation requirements and disclosure requirements are for your portfolio of loans receivables and investments.
• 22:18
  SPEAKER_02: And then it's I think it's similar to all financial reporting and disclosures, make sure you have that, you know, consistency, completeness, and transparency for the readers of your financial statement and try to keep it as simple as possible with the required information, right?
• 22:31
  SPEAKER_02: Avoid kind of that excess of complexity if you can.
• 22:34
  SPEAKER_04: Yeah, that's I think that's great advice.
• 22:36
  SPEAKER_04: Well, Catherine, thank you.
• 22:38
  SPEAKER_04: Really do appreciate you uh spending the time with me today and sharing your expertise.
• 22:42
  SPEAKER_04: Yeah.
• 22:42
  SPEAKER_01: Thanks, Kyle.
• 22:42
  SPEAKER_01: Happy to be here.
• 22:43
  SPEAKER_04: Thank you so much.
• 22:45
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  SPEAKER_01: From Thought Leadership at PWC, I'm Heather Horn.
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