YORBA LINDA, Calif.-Two national CPA firms are delivering much the same advice that was handed down to CUs at the GAC last week: Wait for more details from the NCUA and AICPA before making accounting plans regarding the Corporate Stabilization Plan.
Michael Richards, managing partner at Richards & Associates here, said that his agency and a number of California CPA firms are advising their clients "to hold on and not make any entries until we get a little further clarification on how this will come down. I have also talked to people at the regional office of NCUA, and the impression I get is that they are pretty adamant about it being written down in one year."
Doug Orth, managing partner at the Miami-based Orth, Chakler, Murnane & Company, suggested that legislation to allow CUs to stretch out payments over five years (or even eight) has "legs," and was optimistic about guidance that may come from the American Institution of Certified Public Accountants (AICPA).
"The buzz recently is around the possibility of the AICPA issuing a technical practice aid," Orth explained. "There is discussion that the AICPA is getting close to issuing this guidance, and that the guidance may result in the answer that the assessment should be a 2008 event."
Orth pointed out that recommendation would be somewhat contradictory to what the agency's auditors have stated. "NCUA has indicted that the auditors to the fund have determined the impairment to be a 2009 issue. I don't know if there has been any change of opinion on their side."
Taking the full hit this year is a concern for many credit unions with marginal capital, reminded Richards, who believes that NCUA may show leniency. "NCUA says that they will put an asterisk by any credit union pushed into PCA based on the impairment," Richards said. "I don't know if that is true or not."
Richards surmised that while NCUA will likely require net worth restoration plans by any CU under PCA, the typical "hard and fast" deadlines for plan steps could be stretched out for those under PCA as a result of the corporate bailout.
NCUA Spokesperson Cherie Umbel reported that the NCUA is crafting a supervisory letter to all examiners that will address the matter of credit unions facing PCA as a result of the assessment. "The position NCUA has taken is examiners will consider not only the current net worth level of a credit union, but also how they got there," she told Credit Union Journal through an e-mail correspondence. "If the corporate stabilization action is the sole reason a CU falls into PCA, the impact of that action will be taken into account and maximum flexibility in the PCA actions and resolution action will be shown by examiners."
