The guidance on recalculating the effective rate is not intended to be applied to all other circumstances that result in an adjustment of a loans amortized cost basis and is not intended to be applied to the individual assets or individual beneficial interest in an existing portfolio layer method hedge closed portfolio. Additional considerations may be required when using the WARM method. This guidance applies to all entities applying Subtopic 326-20 to financial assets that are hedged items in a fair value hedge, regardless of whether those entities have delayed amortizing to earnings the adjustments of the loans amortized cost basis arising from fair value hedge accounting until the hedging relationship is dedesignated. If there are no pools with similar risk characteristics to that of the financial instrument, an entity should individually evaluate the instrument for impairment. We believe the guidance provided by the FASB on credit cards may be useful in other situations, such as in determining the life of account receivables from customers who are buying goods or services on a recurring basis. In determining the historical loss information to be used, a reporting entity should consider a number of factors, including: The determination of the period historical loss information to be used in the estimate of expected credit losses is judgmental and may vary based on a reporting entitys specific facts and circumstances. An entity shall consider relevant qualitative and quantitative factors that relate to the environment in which the entity operates and are specific to the borrower(s). As a result, various methodologies can be used to estimate the life of a credit card receivable, which is influenced by the determination of how payments are applied. Under this methodology, the discount rate used to discount estimated cash flows for the purposes of calculating an allowance for credit losses will be the based on the effective interest rate of the instrument. For purchased assets, vintage would be the issuance or origination date.
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