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FASB plan covers some CU loan participations
WASHINGTON (9/17/08)—Credit unions that sell a participating interest in loans could feel a direct impact of a new plan by the Financial Accounting Standards Board (FASB), but those on the purchase side will see little change, said the head of the Credit Union National Association’s (CUNA’s) Accounting Task Force Tuesday. Task force chairman Scott Waite was addressing FASB’s recently proposed amendments that would remove the concept of a qualifying special purpose entity (QSPE) from FAS 140, Accounting for Transfers and Service of Financial Assets and Extinguishments of Liabilities. The accounting body’s intent, in part, is to address concerns about isolating the loan participations and other financial assets from the reach of the originating institutions and its creditors in liquidation. "This provides more clarity as to the accounting treatment required when ‘control’ is maintained over the assets," Waite said. CUNA and its accounting group are reviewing the proposed FASB statements and will file comments with FASB. However, Waite’s group’s early review suggested that sellers of participation must be sure to structure a transaction so that it qualifies as a true “sale” of the assets before removing it from their financial statements. “The Accounting Task Force will be sure to review the exposure draft, provide comments back to the FASB Board, and keep the credit union industry informed,” Waite said Tuesday. He is SVP-CFO of Patelco CU, San Francisco and an advisor to FASB. FASB has been developing its proposal since 2000 and CUNA has argued that there are already sufficient safeguards in place to address the accounting group's concerns about isolating the loan participation asset from the reach of the originating credit union and its creditors in liquidation. Therefore, CUNA has maintained, there is no need for the proposed changes to FAS 140. Use the resource link below to read CUNA comments in its 2004 letter to FASB.


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