Adoption of ASU 2016-01 – Financial Instruments

How will it Affect My Call Report?

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By Kati Barnhill

Many community banks have early adopted ASU 2016-01 – Financial Instruments – in which equity securities, with readily determinable fair values, are marked to fair value each quarter. While the ASU does not become effective until December 15, 2019, it can be advantageous to early adopt as it will result in income.  We’ve seen this accounting standard have a positive impact on bank capital.  If you have adopted this accounting standard early, it will affect your Call Report.

Below is a summary of each place that will be affected by this change.

  • Balance sheet – Schedule RC – line 2c
    • This is where the amount of the investment in the equity security should be reported.
  • Securities – Schedule RC-B
    • The equity securities should not be reported in this schedule, but should be reported in Schedule RC, line 2c, as noted above.
  • Other Assets – Schedule RC-F – line 4
    • Include in this item FRB & FHLB stock and other securities not included in ASU 2016-01 (those that do not have a readily determinable market value).
  • Income Statement – Schedule RI – line 8b
    • This is where the quarterly/YTD increase in the stock’s value should be reported. It is easiest to keep track of this if a separate income statement account has been created.
  • Quarterly Averages – Schedule RC-K – line 4
    • This is where the amount of the investment in the equity security should be reported.
  • Regulatory Capital – Schedule RC-R, Part I – line 9b
    • Leave this part blank if you entered a “1” in Schedule RC-R, part I, item 3a as well as adopting ASU 2016-01.
  • Regulatory Capital – Schedule RC-R, Part II – line 2b
    • This is where the amount of the investment in the equity security should be reported.

For more information about this regulation, refer to our earlier Good $ense article.

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