WASHINGTON (3/19/13)--The Financial Accounting Standards Board (FASB) should delay its credit loss reporting proposal, a plan that the Credit Union National Association says could have costly and harmful consequences for credit unions.
CUNA met with FASB representatives Monday at the CUNA Washington office and highlighted credit union concerns regarding the accounting proposal that would utilize a single "expected loss" measurement for the recognition of credit losses; this would replace the multiple existing impairment models in U.S. generally accepted accounting principles that primarily use an "incurred loss" approach.
Credit unions are concerned that the proposed "expected loss" approach could require use of speculative forecasting of the performance of an asset over the remainder of the asset's life, CUNA President/CEO Bill Cheney and other CUNA and credit union representatives told the FASB representatives.
CUNA also warned that the proposal is extremely complex, and will create new costs for credit unions.
During the meeting, FASB Member Russell Golden told CUNA that the board may consider extending the April 30 deadline for comments on its credit loss reporting proposal.
The International Accounting Standards Board is accepting comment on a similar proposal for international financial reporting statements until July 5. FASB is working on further guidance regarding its own proposal, and hopes to release that guidance in the coming weeks, Golden said.
Julie Renderos, chief financial officer, of Suncoast FCU, Tampa, Fla., and CUNA staff also noted during the meeting that:
Renderos, who is a member of CUNA's Accounting Subcommittee, said the proposal, as currently modeled, could double allowance accounts in some cases, and noted it could also harm credit unions' net worth.
CUNA General Counsel Eric Richard raised concerns that the proposal could impact credit unions more severely than other institutions because of the statutory restrictions on their net worth. Deputy General Counsel May Dunn noted that at a time when credit unions are prospering again the proposal could have a very negative affect on credit unions' operations.
The credit union group reiterated that the users of credit union financial statements are different than those of banks.
Cheney noted that credit union financial reports are mainly released for National Credit Union Administration analysis, not for member use: Bank statements mainly benefit their shareholders.
Golden said he would bring this distinction up with the board and he expressed an interest in having FASB officials meet with more credit unions.
CUNA Chief Economist Bill Hampel also participated in the meeting.