NAFCU Compliance Blog

Accounting; HELOCs

Posted by Anthony Demangone

The "word on the street" is that NCUA will (or perhaps already has this morning) issue another accounting bulletin to clarify some accounting issues with the corporate stabilization program. 

• Access NCUA's corporate stabilization page here. 
• Access NAFCU's news articles here, which should have information about the new guidance.

Update:  NCUA released the Accounting Bulletin 09-2 this morning.

Here's a sneak peek at some of the info that should appear in the bulletin.

AICPA Statement of Position (SOP) 01-6 states, “to the extent that the NCUA Board assesses premiums to cover prior operating losses of the insurance fund or to increase the fund balance to ‘normal operating levels,’ credit unions should expense those premiums when assessed.”  Credit unions should rely upon the advice and guidance of their independent licensed accountant to interpret generally accepted accounting procedures (GAAP) and ensure accurate and transparent reporting on their financial statements.  If a credit union chooses to implement an accounting treatment other than that stated above, they should be prepared to provide written guidance from their accounting practitioner to support that treatment.  If a credit union’s licensed practitioner is willing to provide a written opinion that allows for the delay in the recording of the expenses and indicates in their opinion it is in compliance with GAAP, NCUA examiners will not take exception absent a definitive ruling from the accounting profession to the contrary.

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As you may be aware, the Regulation Z changes to open-end lending do not affect HELOCs.  A Fed representative yesterday indicated that the agency will issue a separate rulemaking to address HELOCs.  There was no word on a time-line.

Corporate Stabilization Program

Here's the latest materials from NCUA's corporate stabilization program.  Yesterday, NCUA released a number of guidance documents designed to explain how the corporate stabilization program will affect natural person credit unions.  Rather than link to all of the documents separately, NCUA created a Corporate Stabilization Program page.  Access it here.

From there, you'll be able to access the following documents:

1. Accounting Bulletin 09-01, which describes the accounting moves credit unions will need to make to account for transactions related to the stabilization program.
2. FAQs regarding the program.  (You know how much I love those FAQs.)
3. And lots of other stuff, including the ANPR.

During yesterday's NAFCU webcast, NCUA officials indicated that they'll add to this page, and to the FAQ when necessary.  Of note: Be on the lookout for a letter to credit unions which will include supervisory guidance given to examiners about this situation.  To paraphrase NCUA officials, they indicated that NCUA examiners are being told to take into account effects of the stabilization program (and its affects on your ROA and net worth) when they examine your credit union.  I'll give you a shout out when that becomes available.

Editor's note.  My post wasn't all that clear on a major point.  My understanding of NCUA's presentation was this: NCUA is instructing examiners not to penalize credit unions for any affects that the stabilization plan would have on a credit union's financials. 

Share Insurance Help; Shameless Plug; Accounting

Hey NAFCU members: we put together an overview regarding the new share insurance changes.  It is available on the NAFCU Compliance Homepage, under research tools.  Just open the "Insurance FAQ" document.   You can find it here. (NAFCU Member Log-in Needed.)

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NAFCU has put together a volunteer BSA training session, which is available on CD.  Read all about it here.  We'll offer BSA training for staff during a November webcast.  You can read all about that via the link above.

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There's new guidance available for fair value accounting.  Read the NAFCU Today news article about it here.  The article also contains a link to the guidance itself.  Make sure your accounting team is aware of the development.

Accounting Hierarchy Released

Yesterday, the Financial Accounting Standards Board released Statement No. 162, The Hierarchy of Generally Accepted Accounting Standards.  You can access it here.

In FASB's words:

The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities.

Statement 162 lays out 4 levels of accounting principles, (a) through (d).  According to the guidance, when an entity is preparing a financial statement (5300, e.g.) and has questions about how GAAP affects a particular transaction, it should look through the accounting principles under (a) first.  If the (a) principles do not address the situation, the entity should then proceed to (b). And so on. 

The Standard is effective 60 days after the SEC approves the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.  (I'm not sure when that will be.)

I'd forward this to your accounting team.

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Saturday was a success!  The rain stayed away, and we both said "I do."  I'll put some photos together in an album for you guys to look at - as soon as I get everyone's OK before I post their grins on the internet!