Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

Appendix B Regulatory Reporting Matters—Interpretation and Reporting Related to U.S. GAAP¹

This appendix is nonauthoritative and is included for informational purposes only.

U.S. Generally Accepted Accounting Principles (GAAP)		Regulatory Reporting Matters
Description	References	Description	References
I. RECOGNITION AND MEASUREMENT
Interest Income Practices for Loans and Other Assets:
Accrual and Nonaccrual Matters
Interest income on loans that are not impaired should be accrued and credited to interest income as it is earned. However, U.S. GAAP does not provide specific criteria for when a loan should be placed on nonaccrual.	FASB Accounting Standards Codification (ASC) 310-10-35	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 ...