Reporting OTTI Losses By: David J. Bayens, CPA Date: 1/7/10 Accounting guidelines, issued in early 2009, apply to investment securities and the analysis of investment portfolios for other-than-temporary impairment (OTTI) losses.  These guidelines direct how OTTI losses are to be reported in income statements.  They also beef up footnote disclosures with the objective of making the loss evaluation process more transparent. As you may recall, the accounting guidelines require companies to evaluate securities for which the fair values are less than their amortized cost.  Unrealized losses on debt securities for which a company does not have the intent or ability to hold until they recover are to be charged to earnings.  For other debt securities, the portion of the decline in value that is deemed to be a credit loss is also charged to earnings.  An example of the presentation of OTTI losses in an income statement follows:   Total OTTI losses $(1,000) Portion of loss recognized in other comprehensive income 400 Net impairment losses recognized in earnings $(600)   We have seen banks include this presentation in the “Noninterest income” section of their income statements.   There are also expanded footnote disclosure requirements.  These include: Information that explains why a portion of the OTTI of debt securities was not recognized in earnings, Methodology and significant inputs used to calculate the OTTI losses charged to earnings, and A tabular rollforward schedule analyzing the amounts related to credit losses charged to earnings. The new accounting rules do not amend existing guidelines regarding recognition and measurement of impairments of equity securities.