Add GAAP accounting standards to the list of factors the NCUABoard may have to consider when setting remaining corporate assessment rates.

CUNA Chief Economist Bill Hampel raised the issue Monday duringa press call, saying should the NCUA rebate extra money to creditunions after corporate losses are repaid, it could create problemsfor industry accountants.

As the corporate stabilization fund winds down, Hampel said, theNCUA will have about $2.5 billion in excess funds that willprobably be returned to credit unions. Because credit unions willhave already recorded the expenses when recording annualassessments, the rebated funds would have to be reversed and addedback to balance sheets as income.

“I'd expect the accounting profession would have an interestingtime figuring out if that assessment is an expense, knowing therecould be a future rebate,” Hampel said.

Yes and no, say industry CPAs.

Dan Mahalak, principal at the St. Clair Shores, Mich.-basedaccounting firm Cindrich Mahalak & Co., said he thinks creditunions would record any NCUA corporate windfall as income for thatyear.

However, he said timing could present a problem for accountants,as could the reasons for the rebate. Should the NCUA rebate moneyin January, it could potentially be interpreted as a “fix” for theprior year's assessment. However, if a rebate would occur later, itwouldn't present a problem for the previous year's financialreports.

The reasons for a rebate will also affect accounting treatments,the suburban Detroit accountant said.

“To me, it's contingent upon what caused the assessment to beoverstated,” Mahalak said. “Was this something the NCUA or creditunion should have known beforehand? Was the NCUA too cautious tosay anything about a potential recovery?”

Mahalak added that the NCUA is unlikely to miss the mark bymuch, but if the agency does, it will err on the side ofovercharging.

“When we get to that point, a lot will be said about the factthat this is it, the corporate stabilization effort is finallyover,” he said. “And the NCUA isn't going to want to haveunderstated that loss estimate and have to collect more assessmentsif everybody thinks we're done.”

Jeff Paille, partner at the Rochester, N.Y.-based accountingfirm The Bonadio Group, said recent good news about reduced lossestimates and securities lawsuit recoveries aren't likely to translate intoincome for credit unions in the near future.

“It's too early to understand the value of that to naturalperson credit unions at this point. We're just not there yet,”Paille said.

In the same way credit unions aren't supposed to accrueprojected corporate assessment expenses, they shouldn't plan toreceive any rebates either, he said.

Interestingly, both Paille and Mahalak said credit unions dofrequently accrue assessment costs against their advice. However,both men said even though credit unions receive exam and/or auditexceptions for the practice, because the assessment bill comes inthe fall, by year-end the funds are already off the books.

“The only risk is that the NCUA expects to see that costrecorded in the 3^rd quarter Call Report, so creditunions that accrue throughout year have to reconcile previousfinancial reports so all the expense accrues in the 3^rdquarter,” Paille said.

HEATHER ANDERSON

Add GAAP accounting standards to the list of factors the NCUABoard may have to consider when setting remaining corporate assessment rates.

CUNA Chief Economist Bill Hampel raised the issue Monday duringa press call, saying should the NCUA rebate extra money to creditunions after corporate losses are repaid, it could create problemsfor industry accountants.

As the corporate stabilization fund winds down, Hampel said, theNCUA will have about $2.5 billion in excess funds that willprobably be returned to credit unions. Because credit unions willhave already recorded the expenses when recording annualassessments, the rebated funds would have to be reversed and addedback to balance sheets as income.

“I'd expect the accounting profession would have an interestingtime figuring out if that assessment is an expense, knowing therecould be a future rebate,” Hampel said.

Yes and no, say industry CPAs.

Dan Mahalak, principal at the St. Clair Shores, Mich.-basedaccounting firm Cindrich Mahalak & Co., said he thinks creditunions would record any NCUA corporate windfall as income for thatyear.

However, he said timing could present a problem for accountants,as could the reasons for the rebate. Should the NCUA rebate moneyin January, it could potentially be interpreted as a “fix” for theprior year's assessment. However, if a rebate would occur later, itwouldn't present a problem for the previous year's financialreports.

The reasons for a rebate will also affect accounting treatments,the suburban Detroit accountant said.

“To me, it's contingent upon what caused the assessment to beoverstated,” Mahalak said. “Was this something the NCUA or creditunion should have known beforehand? Was the NCUA too cautious tosay anything about a potential recovery?”

Mahalak added that the NCUA is unlikely to miss the mark bymuch, but if the agency does, it will err on the side ofovercharging.

“When we get to that point, a lot will be said about the factthat this is it, the corporate stabilization effort is finallyover,” he said. “And the NCUA isn't going to want to haveunderstated that loss estimate and have to collect more assessmentsif everybody thinks we're done.”

Jeff Paille, partner at the Rochester, N.Y.-based accountingfirm The Bonadio Group, said recent good news about reduced lossestimates and securities lawsuit recoveries aren't likely to translate intoincome for credit unions in the near future.

“It's too early to understand the value of that to naturalperson credit unions at this point. We're just not there yet,”Paille said.

In the same way credit unions aren't supposed to accrueprojected corporate assessment expenses, they shouldn't plan toreceive any rebates either, he said.

Interestingly, both Paille and Mahalak said credit unions dofrequently accrue assessment costs against their advice. However,both men said even though credit unions receive exam and/or auditexceptions for the practice, because the assessment bill comes inthe fall, by year-end the funds are already off the books.

“The only risk is that the NCUA expects to see that costrecorded in the 3^rd quarter Call Report, so creditunions that accrue throughout year have to reconcile previousfinancial reports so all the expense accrues in the 3^rdquarter,” Paille said.