News that the International Accounting Standards Board and Federal Accounting Standards Board might reconsider some mark-to-market accounting rules is good news for corporate credit unions that are scrambling to avoid permanent capital write-downs based on what could be only temporary market dislocations.
Association of Corporate Credit Unions Executive Director Brad Miller called the move "huge", saying under the proposed rules, it's his understanding corporates could return any future gains on impaired investments back to capital accounts. Currently, if impaired investments perform better than estimated, those gains would be applied to earnings, and couldn't be used to fund member contributed capital accounts.
The IASB proposed new rules to the cost measurement and impairment of financial instruments Nov. 5. The draft and comments, which will be collected until June 30, 2010, are available on the group's Web site (www.iasb.org).
FASB Chairman Robert Herz said Tuesday regulators should use their own judgment in deciding when to depart from GAAP accounting requirements. The NCUA already has some leeway when it comes to accounting standards; for example, the agency currently uses Nov. 30, 2008 net worth ratios for regulatory purposes.
Last month, the ACCU asked the NCUA to allow corporates to "replenish capital if loss projections don't materialize." NCUA Chairman Debbie Matz rejected the plea in a Nov. 16 statement, saying potential earnings were "unlikely" to be isolated from legacy assets.