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ARLINGTON, Va.-The Financial Accounting Standards Board is set to release a proposed rule on business combination accounting with clarification in February with a 90-day comment period, according to NAFCU Director of Regulatory Affairs Gwen Baker. “We have ongoing discussions with staff from FASB, so we just touched base with them to see where it was heading,” she explained. Baker added that FASB is not backing down yet from the January 2006 effective date for the exposure draft (proposal) nor the substance though they do plan some clarification. The proposal would eliminate the “pooling” method, where merging institutions assets are combined, to the “purchase” method, which would keep the acquiring institutions from counting the merged institutions retained earnings on its balance sheet. This change could drastically reduce the number of credit union mergers because many acquiring credit unions would get into trouble with Prompt Corrective Action if they cannot pool the assets. NAFCU lobbyists are pursuing a legislative remedy that would revise the definition of net worth from retained earnings to capital as defined by NCUA. FASB previously said they do not object to this amendment, and Baker said she has not heard any concerns expressed by the banking industry.

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