NCUA Provides Guidance on Donated Equity Accounting
ALEXANDRIA, Va. -- NCUA has revised its policy on small credit union accounting for donated equity.
Previously, credit unions under $10 million in assets accounted for donated tangible fixed assets of material value by recording the estimated fair value as donated equity, a separate classification of the credit union's equity.
Under the new policy, credit unions should record the receipt of a gift or donation of a tangible fixed asset of material value as income at the estimated fair value. "Credit unions should no longer use the Donated Equity account to account for these assets when a credit union receives such donations," an NCUA Accounting Bulletin (07-1) stated. "The existing [Accounting Manual for Federal Credit Unions] practice of recording cash and other immaterial fixed assets as income upon receipt will continue without change."
The result effect is that the credit to income will become part of net income "which, when closed into Undivided Earnings, will be included in the calculation of net worth."
The bulletin was effective upon issuance.
Additionally, NCUA issued a bulletin updating the policy for accounting for grants at credit unions under $10 million in assets. "Care must be taken in evaluating each grant because the accounting follows the nature of the arrangement," NCUA cautioned in Accounting Bulletin 07-2.
The bulletin outlines the various types of grants whether they are "promise to give" or not, or "conditional versus unconditional promise to give."
Both bulletins are available at www.ncua.gov.