FASB Releases New Standards, CUs AwaitCongressional Fix

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WASHINGTON - (08/24/05)A proposal that would significantlychange accounting methods used in CU mergers has officially beenreleased by the Financial Accounting Standards Board (FASB) and theInternational Accounting Standards Board. The plan calls forimplementing the FASB merger rule that eliminates thepooling-of-interests method of accounting for business combinations(simple combination of the balance sheets of the merging entities),which is the standard used in most credit union mergers. FASB isproposing credit unions instead use of the purchase method ofaccounting (also known as the “acquisition method”)under which a surviving credit union would show on its books thefair (market) value of the non-surviving credit union. The keyissue for credit unions is that not all of the equity of thesurviving CU would be counted toward PCA. The proposal, which isopposed by the credit union trade groups, would be overruled in twodifferent bills currently pending before Congress.

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