FAIRFIELD, Conn. (8/8/13)--In a major step that could be positive for credit unions, the Financial Accounting Standards Board Wednesday issued a request for public comment on a proposal that would allow nonpublic business entities to use accounting and reporting alternatives under U.S. Generally Accepted Accounting Principles (GAAP).
Such entities, that could include credit unions, could be subject to more flexible accounting requirements, although FASB acknowledged that whether alternatives allowed under GAAP would be permitted "may ultimately be determined by regulators."
Comments are due to FASB September 20, and CUNA will be posting a CUNA Comment Call on its Regulatory Advocacy website this week.
The proposal includes a revised definition of "public entity." When finalized, this definition will be used by FASB to identify the different needs of users of private company financial statements as opposed to the users of public company financial statements, according to the "Proposed Accounting Standards Update."
The framework should also help identify opportunities for reducing the complexity and costs associated with preparing financial statements in accordance with GAAP for nonpublic entities. The proposal, in and of itself, would not affect existing requirements.
The Credit Union National Association has long advocated to FASB that credit unions, based on their structure as not-for-profit, member-owned financial cooperatives, should not be subjected to a number of onerous and costly reporting requirements that should be applied to only publicly traded companies.
Patelco CU EVP-CFO Scott Waite, who has served on several FASB advisory councils for 10 years, was also able to help draw focus on the need for accounting treatment distinctions for credit unions.
"This is an important development," CUNA's Deputy General Counsel Mary Dunn stated.
In CUNA's June 21 comment letter to FASB, Dunn noted: "Unlike most other financial institutions, credit unions do not issue stock or pay dividends to outside stockholders. By law, they must use their earnings to build capital and as member-financial institutions, credit unions do not issue stock or pay dividends to outside stockholders."
She added, "By law, credit unions must use their earnings to build capital and as member-owned cooperative institutions, work hard to provide favorable rates on loans and savings, and to minimize fees."