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Assets and Extinguishments of Liabilities



An enterprise may acquire a loan either by originating or by purchasing the loan. That loan may be any type of receivable or debt security, including a mortgage-backed security, a corporate bond, or a Treasury bill, note, or bond. The enterprise may (a) retain the loan until repayment, (b) sell the entire loan including all of the contractual interest and principal payments, or (c) sell only a portion of the loan, that is, sell the interest payments, the principal payments, or a portion of either or both. When a portion of the loan is sold, the seller's right to some or all future cash flows may be subordinate to the buyer's right to future cash collections or the seller may otherwise allocate Copyright © 2006, Financial Accounting Standards Board Not for redistribution Page 1credit risk disproportionately between the portion sold and the portion retained (for example, the seller may promise to reimburse the buyer for losses), with or without disproportionate sharing of other rights or risks inherent in the loan. If servicing is retained, the stated servicing fee may be equal to, above, or below a normal servicing fee or no servicing fee may be stated

Year: 1989
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