Emergency Accounting Bulletin Covers Sales

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NCUA ruled last week that credit unions affected by Hurricane Katrina can sell off investments they plan to hold to maturity without compromising the integrity of their financial reporting.

In an emergency accounting bulletin issued just before the weekend, NCUA said all affected credit unions may sell held-to-maturity investments to fund liquidity, including emergency withdrawals and loans, to aid affected residents of the stricken areas. Under generally accepted accounting principles, selling held-to-maturity investments may call into question an entity's intent to hold the remaining held-to-maturity securities to maturity and require them to mark those investments to their market value.

The accounting bulletin is meant to dispel any reluctance by credit unions to fund emergency liquidity needs by selling off their investments.

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