In a briefing before representatives of CUNA, Jeff Mahoney, counsel to the chairman of the Financial Accounting Standards Board (FASB), said proposals that would alter the way credit unions account for mergers will likely be issued in final form during the first half of 2007, meaning that the currently expected effective date of January 2007 may be pushed back to later in the year.
As proposed by FASB, the rule would require the acquisition method of accounting to govern the combination of mutual entities, including credit unions. Scott Waite, SVP/CFO of Patelco CU, San Francisco, and chair of CUNA's task force studying the FASB proposal, cautioned credit unions not to underestimate the impact of proposed guidance.
CUNA reported that among its "serious concerns" is that the new accounting method would not allow merged credit unions to count the retained earnings of acquired credit unions on their balance sheets, which could lower its net worth classification under prompt corrective action (PCA) rules.
The trade association noted that it has been lobbying for legislation to maintain the use of the "pooling method." Currently, there are two bills pending in Congress that would address the issue.
