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WASHINGTON-CUNA has urged the Financial Accounting Standards Board not to proceed with its proposal on fair value measurements (File Reference No. 1201-100) as is. The proposal, called an Exposure Draft, creates a framework for measuring fair value applying to financial and nonfinancial assets and liabilities. It does not establish requirements for when to measure assets and liabilities at fair value, but how. The exposure draft aims to clarify methods for estimating fair values and adds enhanced disclosures. “This proposed Statement is especially important to credit unions because under the purchase method of accounting in FASB’s Business Combinations project, the credit union deemed to be the `acquiring’ credit union in a merger would have to determine and reflect on its financial statements the fair value of the acquired credit union’s balance sheet (including goodwill and intangible assets),” CUNA Associate General Counsel Mary Dunn and Senior Regulatory Counsel Catherine Orr wrote. The trade association also expressed concern over the cost of the proposal for credit unions. “Specifically, significant costs for credit unions would be involved in determining the fair value of the acquired entity’s balance sheet, including the determination of goodwill and intangible assets,” CUNA wrote. “Further, there would be ongoing costs associated with assessing any potential impairment of goodwill and intangible assets (annually at a minimum). We urge FASB not to proceed with the Business Combinations project as it currently stands.” At the same time, CUNA commended FASB for its efforts to clarify fair value measurements and put it all in one place to improve consistency, comparability and reliability. Dunn and Orr requested more guidance on the fair value measurement of financial institution’ core deposits. Additionally, the letter stated that CUNA does not support the expanded disclosures on the use of fair value with regard to credit unions, because those disclosures are aimed at investors and creditors. “First, credit unions are private entities that are owned and run by their members; but members cannot buy or sell their interests in the credit union.Second, the [NCUA].has implemented ALM (asset liability management) review as part of its examination process. The review requires credit unions to perform thorough analysis of interest rate risk and liquidity risk on their balance sheets. We feel that a description of the valuation methodologies in the disclosure of significant accounting policies is sufficient for normal financial statement presentations.” If FASB’s final proposal does include these disclosures, CUNA requested that FASB explain that “assets recorded at cost or fair market value when acquired and depreciated do not have to be remeasured every accounting period.” CUNA also suggested extending the compliance date an extra year for credit unions and other private and non-profit entities.

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