FASB Lends Imprimatur To CU AccountingFix
WASHINGTON - (04/14/05) -- The nation's chief accountingstandards-setter told Congress Wednesday he sees nothing wrong withproposal to amend the Federal CU Act to allow credit unions toskirt new rules on accounting for mergers. The proposal, whichwould redefine the concept of 'net worth' for credit union to allowthem to continue pooling their capital mergers "will not legislateaccounting standards," Robert Herz, chairman of the FinancialAccounting Standards Board, assured lawmakers during a hearingbefore the panel of the House Financial Services Committee. NCUAChairman JoAnn Johnson told the panel the change in definition isnecessary because the FASB's new prohibition on the pooling methodof accounting will dilute a credit union's net worth after amerger, threatening some credit unions with a brush with minimumcapital rules, and thereby discouraging mergers. More importantly,noted Johnson, it could discourage some credit unions fromacquiring troubled institutions in assisted mergers, therebyrequiring that those institutions be liquidated instead at a costto the National CU Share Insurance Fund. Rep. Spencer Bachus,R-Ala., chairman of the panel, noted the accounting fix appears tobe on the fast track to passage, as no one has come forward tooppose it and it has broad bipartisan support.