In calculating the ALLL, often one of most cumbersome components of the process proves to be the ASC 310-10-35 (FAS 114) impairment analysis.
Proper FAS 114 impairment analysis is critical for a bank evaluating the collectibility of its loans and for determining the proper reserve calculation. Use this downloadable ASC 310-10-35 (FAS 114) loan impairment worksheet for a simplified, collateral-based analysis. This worksheet is formatted to analyze one loan at a time with one piece of collateral.
Fair Market Value of Collateral, Present Value of Future Cash Flows, and Loan Pricing. When performing an ASC 310-10-35 impairment analysis, which method is the most appropriate for your bank or credit union? Abrigo’ risk management consultants provide an overview of the ASC 310-10-35 portion of the ALLL calculation. They discuss three valuation methods and when to use them, common collateral impairment challenges, and when it is appropriate for a loan in ASC 310-10-35 status to be moved to ASC 450-20 (FAS 5).
This brief video covers the topic of the ASC 310-10-35 (FAS 114) portion of the ALLL calculation. A Abrigo consultant details out the requirements for impairment analyses using the Fair Market Value of Collateral, Present Value of Future Cash Flows and the Loan Pricing methodologies.
Effective loan classification is a must for an effectively calculated ALLL. In this video, a Abrigo consultant describes the parameters guidance sets out to identify an ASC 310-10-35 (FAS 114) loan. Typically these loans are evaluated individually and a fair market value of collateral or a present value of future cash flow analysis will be conducted to determine the loan's value.
ASC 310-10-35 (FAS 114) loans, or “impaired” loans, are calculated individually, as the parameters of each loan and its measure of loss will be unique. There are various ways to value these loans, including fair market value of collateral, net present value of future cash flows, and loan pricing.
FASB is hosting CECL workshops around the U.S. in coming months, reinforcing its commitment to the upcoming current expected credit loss standard, or CECL.