On March 31 2017 the Financial Accounting Standards Board (FASB)
adopted a new Accounting Standards Update (ASU), ASU No. 2017-08,
to change the rules governing accounting for amortization of
premiums for purchased callable debt securities. Under ASU No.
2017-08, Receivables - Nonrefundable Fees and Other Costs
(Subtopic 310-20) Premium Amortization on Purchased Callable Debt
Securities the amortization period for certain callable debt
securities held at a premium has been shortened to the earliest
call date.
Under current generally accepted accounting principles, a
premium is typically amortized as an adjustment of yield to the
maturity date when a callable debt security is purchased at a
premium, even if the holder is certain the call will be exercised.
As a result, upon the exercise of a call on a callable debt
security held at a premium, the unamortized premium is recorded as
a loss in earnings.
