NORWALK, Conn. Credit unions are calling on the Financial Accounting Standards Board to exclude them from the definition of a public business entity under new accounting classifications potentially exempting them from new rules by FASB or other regulatory entities.
“As a not-for-profit, member owned financial cooperative, Fort Knox Federal Credit Union believes it is important to recognize that inherent differences do indeed exist between publicly traded companies and not-for-profit entities such as credit unions,” Ramona Buchanan, chief officer for the $1-billion Kentucky credit union, told the FASB in a comment letter on the proposal. “Unlike most traditional financial, credit unions do not have the ability to issue stock, offer subordinated debt instruments to build capital or pay dividends to outside stockholders.”
According to Fort Knox CFO, such a classification for credit unions would serve to reduce “complexity and significant costs associated with preparation of financial statements in accordance with GAAP for nonpublic entities without sacrificing transparency.”
For years credit unions have argued for separate accounting treatment from publicly traded entities, noting that credit union financial disclosures are aimed at their member/owners and regulators, not for public investors. Many in the credit union movement argued during the demise of the five corporate credit unions NCUA should have been allowed to ease fair market accounting rules that may have saved one or more of the corporates.
Rick Hoffman, vice president, business development and legislative affairs for Credit Union of Southern California, told the FASB that credit unions should be excluded from the definition of a public business entity because they do not meet any of the FASB criteria, specifically that they file financial statements with the Securities and Exchange Commission; required to file financials in conjunction with the public offering of securities; and they have securities that can be traded publicly, among other elements. Such a listing, according to Hoffman, would afford credit unions “potential accounting and reporting alternatives.”
The Georgia CU Affiliates told the FASB a designation as a nonpublic entity would allow their regulator, NCUA, “to have a significant role in permitting their regulated entities to apply certain modified standards that would still qualify as Generally Accepted Accounting Principles.”
The California/Nevada CU Leagues urged the FASB “to work closely with regulatory agencies, including (NCUA) so that eligible credit unions will be able to take full advantage of any appropriate flexibility in financial reporting under U.S. GAAP.”
