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CUNA rep GAAP changes would cost CUs thousands
WASHINGTON (8/3/10)--Speaking during a recent Credit Union National Association (CUNA) audio conference on proposed changes to the Financial Accounting Standards Board’s (FASB'S) Generally Accepted Accounting Principles (GAAP), Mid Minnesota FCU's Pam Finch said that the proposed changes could result in up to $40,000 in additional annual costs for her credit union. Finch, who is the Chief Financial Officer (CFO) of her Baxter, Minn.-based credit union and also serves as CUNA CFO Council chair, said that while much of the increased cost would be related to use of an outside firm to value her credit union's financial instruments, additional costs are likely, such as costs related to increased resources necessary to gather and analyze information. Representatives from FASB and the National Credit Union Administration (NCUA), as well as CUNA Accounting Subcommittee chair and CFO of San Francisco, Calif.'s Patelco CU Scott Waite took part in the audio conference. The proposed changes, as set forth in a FASB exposure draft released in May, would modify GAAP by requiring most financial instruments to be measured at fair value. In addition, the changes would require loan loss reserves to be measured on a forward-looking "expected loss" basis. This differs from the current method, which uses a historical "incurred loss" approach. FASB has informally stated that it would like to have a final rule in place by next summer. Credit unions over $10 million in assets are required to comply with GAAP. CUNA raised general concerns with FASB prior to the issuance of the proposal, and CUNA remains extremely concerned about the proposed changes. CUNA has been working with its accounting subcommittee to identify key problems and frame its message to FASB, and will also be working with the NCUA and other policymakers to ensure credit union concerns are presented to and considered by FASB. While the primary goal of the FASB standards is reportedly to increase transparency for investors, panelists asked how this would benefit credit unions due to the unique, member-owned, credit union model. CUNA regulatory staff said that while FASB has provided a four year deferral of most requirements for entities with under $1 billion in assets, credit unions--regardless of asset size--should provide FASB with their input as soon as possible, either directly or indirectly through CUNA. “It is vital that credit unions speak up during the FASB's comment period for these significant proposed changes,” CUNA Regulatory Counsel Luke Martone added. The comment period for the proposal ends on Sept. 30. CUNA will be meeting with FASB and filing a formal comment letter, and CUNA welcomes input from member credit unions. For an archived version of the audio conference, use the resource link.


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