WASHINGTON (3/11/09)—The American Institute of Certified Public Accountants (AICPA) yesterday issued guidance on how credit unions may account for costs associated with the National Credit Union Administration’s (NCUA) Corporate Stabilization Plan. On Jan. 28, the NCUA announced a $1 billion capital infusion for U.S. Central FCU, and a deposit guarantee on uninsured shares at all corporates through February. For those corporates signing a supervisory agreement with the NCUA, it would continue the deposit guarantees through 2010. The agency’s initial estimate of the insurance liability as a result of the guarantee was $3.7 billion, based on corporate credit unions' holdings in impaired asset-backed securities. As a result, the NCUA announced that credit unions would be required to replenish .51% of their National Credit Union Share Insurance Fund (NCUSIF) deposit and pay a premium to bring the NCUSIF's equity level back to 1.3%. The good news in the AICPA opinion comes regarding credit union treatment of the replenishment of the 1% deposit and premium costs associated with the agency’s corporate stabilization efforts. The AICPA is providing flexibility on how to report both the impairment and the premium costs by offering different accounting approaches and no clear directive favoring one over the others. AICPA said credit unions have flexibility to work with their accountants and auditors to determine whether it is more appropriate to:
* Adjust their 2008 financial statements to reflect the insurance premium and deposit costs; * Adjust their 2008 statements for the deposit impairment only and report the premium in 2009; or * Reflect the premium and insurance costs on 2009 statements.
The AICPA guidance also provided advice to corporate credit unions with investments in U.S. Central FCU, and natural person credit unions with capital in those corporates. It described how to evaluate whether they need to write down such capital as a result of U.S. Central's other-than-temporarily-impaired (OTTI) charges of $1.2 billion for 2008, announced on Jan. 28. While the AICPA Technical Practice Aid is not an official ruling from the Financial Accounting Standards Board, it is guidance that accountants and practitioners may rely on in advising credit unions and other clients how and when to report financial issues. The Credit Union National Association (CUNA) Accounting Task Fork was among the interested parties that weighed in with the AICPA on the issues addressed in the AICPA aid. CUNA President/CEO Dan Mica sent a summary of these documents to leagues and credit unions last night.