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Proposed SOP guidance on treating debt securities.


A proposed statement of position on the treatment of debt securities held for sale has been approved by the American Institute of CPAs accounting standards executive committee (AcSEC). An exposure draft is scheduled to be released by the end of March for public comment.

The proposed SOP, which would become effective for financial statements for periods ending on or after December 15, 1990, applies to banks, savings and loan associations, credit unions and insurance and finance companies.

AcSEC Chairman John L. Kreischer said, "Most financial institutions have reported these assets as investments if they had no current plans to sell them. The SOP will require them to have the ability to hold the debt securities to maturity and demonstrate that they intend to hold them for at least one year." Otherwise, they will treat a security as being held for sale and record a loss when the market price falls below cost.

The SOP also provides guidelines for assessing a financial institution's ability to hold debt securities and for demonstrating the intent to hold, which has been interpreted in various ways in the past.
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Author:Burge, Marianne
Publication:Journal of Accountancy
Date:Mar 1, 1990
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