International Finance and Accounting Handbook

the fair value of each component. The proceeds received, the $900 of cash, represents
the fair value of the interest sold. The fair value of the residual interest is determined
through a discounted cash flow analysis. The cash flows to the residual holder are es-
timated based on the contractual cash flows of the assets, assumptions such as losses

21.6 ACCOUNTING 21 • 15

Exhibit 21.6. Decision Tree Example.

No

Transfer is of recorded financial asset or derivative instrument that are

not financial assets

Ye s

No

Transferred assets are legally isolated

Transferor has no continuing

involvement, rights or obligations

SFAS 140 is not applicable

The transferee is an SPE

The transferee is a QSPE

Transferee SPE meets 3% outside

equity provision of EITF Topic D-14

and related guidance

Record the transfer as a financing

Ye s

No

Nothing constrains the transferee’s or

beneficial interest holder’s, if QSPE

is used, right to pledge or exchange

the transferred assets or BI, if QSPE

is used, and provides more than a

trivial benefit to the transferor

The transferor does not maintain

effective control over transferred

assets

Ye s Record the transfer as a sale

No

Ye s

Ye s

Ye s

No

Ye s

Ye s

No

No

No

Fair Value of Percentage Allocated

Financial of Total Carrying

Components Fair Value Amount Gain-on-Sale

Loans Sold $ 900.00 80.82% $ 808.18 $91.82
Residual Interest 188.52 16.94% 169.38
Servicing Asset 25.00 ____2.24% 22.25
$1,113.62 100.00% $1,000.00

Less Expenses _______($5.00)

Net Gain $86.82

Exhibit 21.7. Gain-on-Sale Calculation.