Financial Institutions Experience With Addressing Asc 310-30 Requirements

By Author: alda rich
Total Articles: 18
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One of the biggest challenges for Financial Institution Chief Financial Officers is the monthly accounting for acquired loans with evidence of impairment referred to as ASC 310-30 and formerly known as SOP 03-3. The lack of understanding for the strategic advantage and correct ASC 310-30 implementation is a costly oversight and in many cases sabotages the success of the acquisition.

Historically, Banks and their advisors have relied on Excel based tools to attempt to track the monthly activity of the components for each loan carrying value. Since this proved cumbersome with Excel, advisors recommend Banks to comingle the carrying value components into a concept referred to as the ‘Mark’ and the ‘Mark’ has caused countless hours of frustration for financial institutions’ finance and reporting teams. By attempting to track the carrying value components; non-accretable difference, accretable discount and additional contractual cash flows by grouping them into the ‘Mark’, financial institutions face quarterly struggles to prepare their call report schedules and financial statement disclosures. The ...
... ‘Mark’ makes documentation and examinations by external auditors and regulators time-consuming and painful.

Nonetheless, folks have attempted to use Excel to track charge-offs, recoveries, reallocation of non-accretable difference, and more importantly the recognition of interest and interest payments from the financial institution’s loan core system. Even with Excel macros, the process to compute, track and report on these various monthly calculations is highly vulnerable to error and only viable for a small portfolio (less than 10 loans) and for a short amount of time, a few months. BanqLogix has held discussions with several banks and based on these conversations, using Excel for ASC 310-30 is at best prone to errors and at worst, does not provide the benefits of aligning the accounting with your strategic goals and objectives.

Until BanqLogix and its truly automated ASC 310-30 software entered the market, there has been no solution that complies with the accounting guidance as intended. Thus it was almost justifiable to make the decision to use Excel to help with the accounting hoping the undetected errors were small enough to only amount to immaterial differences. A gamble most banks would prefer not to take.

As evidence of the ineffectiveness of Excel, comprehensive studies completed at the University of Hawaii and reported on by Oregon State University have tracked the percentage of spreadsheets used in business containing errors and results consistently show that 90-94% of all spreadsheets contain errors. The majority of these errors (80%) have been classified as serious errors. Consequently, there is a high probability that decisions based on spreadsheets will be based on erroneous calculations and typographical errors. ASC 310-30 mandates multiple calculations per loan, every month. As such, using Excel long-term is not reliable, nor sustainable. The frustration, time and cost necessary to constantly review the Excel accuracy coupled with the additional regulatory and external audit scrutiny outweigh the Excel cost benefit.

BanqLogix’s sophisticated program architecture easily scales to client needs and provides for specific report customization. In addition, LAWEI is a Software as a Service (SaaS) model using virtual private cloud technology fully supported and managed by BanqLogix.

With BanqLogix’s ASC 310-30 software, your loan data is uploaded monthly and the multiple calculations are executed automatically producing all required journal entries and generating audit friendly reports consistently and in compliance with ASC 310-30.

Contact us for loan valuation at 1.855.BANQLOGIX or info@banqlogix.com to make your acquisition a success.