WASHINGTON (2/11/14)--The Financial Accounting Standards Board (FASB) recently issued a final standard that defines the term "public business entity," and it excluded credit unions from that definition. That is notable for credit unions because the definition will be used by FASB and its Private Company Council (PCC) to specify the scope of future accounting guidance.
The Credit Union National Association and other stakeholders asked FASB to improve its definition of "public business entity" to clear up current inconsistencies and complexities caused by having multiple definitions. The new definition will make it clearer which nonpublic entities potentially qualify for alternative financial accounting and reporting guidance.
CUNA has maintained that credit unions clearly are outside the definition of a "public business entity" and therefore should be eligible for alternatives under Generally Accepted Accounting Principles--or GAAP--that are established by the PCC.
However, CUNA Assistant General Counsel Luke Martone cautioned, credit unions should proceed with some caution.
"FASB has stated that, 'decisions about whether an entity may apply permitted differences within U.S. GAAP ultimately may be determined by regulators...and other creditors, or other financial statement users that may not accept financial statements that reflect accounting or reporting alternatives for private companies,'" Martone noted.
"So, the extent of any latitude afforded to credit unions will also involve the National Credit Union Administration and that could be problematic--although we will push them for as much flexibility as possible.
"We will be discussing this issue again with senior NCUA staff during meetings at the CUNA Governmental Affairs Conference this month and encouraging them to allow eligible private company alternatives," Martone said.