Asset Management Intelligence - Q1 2016 - New ASU 2014-11 Disclosures for Year End 2015

February 19, 2016

By Ari Samuel, CPA and Melissa Miro, CPA

In June 2014, the Financial Accounting Standards Board issued an amendment to Topic 860 – Transfers and Servicing, Accounting Standards Update No. 2014-11Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures (the "ASU"). Although many of the provisions of this ASU are not applicable to funds, the ASU does require certain additional financial statement disclosures for funds that enter into repo lending transactions. These new disclosure requirements are effective for private entities for annual periods beginning after December 15, 2014.

The main provisions of the ASU changes the accounting for repurchase-to-maturity transactions and repurchase financing agreements executed contemporaneously with a repurchase agreement with the same counterparty. Previously, these transactions were accounted for as a sale with a forward repurchase commitment. Under the ASU, these types of transactions should be accounted for as secured borrowings.

As funds account for repurchase agreements as secured borrowings, these provisions will generally not have an impact on funds. However, the ASU does require additional disclosures for all repurchase agreements and security lending transactions, as follows:

  • A disaggregation of the gross obligation by the class of collateral pledged
  • The remaining contractual time to maturity of the agreements
  • A discussion of the potential risks associated with the agreements and the related collateral pledged, and how those risks are managed.

The following is an example of the quantitative disclosure included in the ASU:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions Accounted for as Secured Borrowings
(Dollars in Millions)

Asset Management Intelligence - Q1 2016

About Ari Samuel

Ari Samuel has nearly 20 years of public accounting experience, providing technical guidance on accounting and auditing issues to our financial services group.

About Melissa Miro

Melissa Miro is a Financial Services Group Senior Audit Manager focusing on hedge funds and funds of funds.

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