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WASHINGTON-Congressman Spencer Bachus (R-Ala.), together with Vermont Independent Rep. Bernie Sanders, introduced legislation March 2 to amend the definition of credit unions’ net worth in response to changes proposed by the Financial Accounting Standards Board. Without amendment, credit unions would be stuck with a definition of `retained earnings’ for net worth, which could place many in trouble with Prompt Corrective Action under FASB’s anticipated accounting changes. Currently credit unions use the `pooling’ method of accounting in mergers, which allows for the combination of the capital of the two institutions following a merger. As FASB shifts everyone to the `purchase’ method expected Jan. 1, 2006, credit unions could only count the capital of the remaining institution while combining the assets of the two, artificially pushing down its net worth. The Net Worth Amendment for Credit Unions Act would change the definition of net worth to “acquired equity,” thereby getting around the problem. “Our legislation will amend the Federal Credit Union Act to ensure that when credit unions merge, two-plus-two they will continue to equal four. Well-capitalized institutions should not be placed at a disadvantage due to the unintended consequences created by the FASB rule,” Bachus said in a statement. “I will be chairing a hearing on the legislation next month and hope the legislation will be considered on the floor in the near future.” Congressman Sanders said, “I am delighted to be an original co-sponsor of this important legislation. Credit unions are an integral part of communities all across America and play a vital role in the economic well being of millions of families. For almost all of the past century, credit unions have brought people together, allowed them to share their resources, and served the financial needs of their members in good times and bad. This legislation will continue to allow credit unions to flourish, and I look forward to working with Chairman Bachus to further strengthen America’s credit unions in the 109th Congress.” The bill had 14 original cosponsors, plus House Financial Institutions and Consumer Credit Subcommittee Chairman Bachus, equally from both sides of the aisle. NAFCU Director of Legislative and Political Affairs Brad Thaler said he expects the bill to get brief hearing before Bachus’ subcommittee shortly after Congress’ Easter recess, putting it in early April. He added that the bill will likely move quickly to the floor and be placed on the suspension calendar, which is reserved for non-controversial items. On the Senate side, the bill’s future is less clear as far as whether a new bill will be introduced or the Senate will take up the House bill, Thaler explained. He said NAFCU is working with Senator Mike Crapo (R-Idaho) who is expected to introduce a regulatory relief bill this session, as well as other possible candidates for ushering the bill through the Senate. NCUA Chairman JoAnn Johnson expressed her strong approval for the measure. “NCUA has strongly supported this amendment as it will address issues relevant to the accounting for mergers of credit unions when the Financial Accounting Standards Board (FASB) lifts its exemption for cooperatives.Safe and sound, well-capitalized institutions should not be penalized during the merger process as a FASB rule potentially could evolve into an unintended consequence. NCUA will continue to serve as a resource for Congress, as this amendment moves forward toward enactment.” CUNA also commended Bachus and the other cosponsors “for stepping forward to address an issue that must be resolved by the beginning of next year, when the Financial Accounting Standards Board’s accounting rule takes effect. While other legislation currently under preparation will likely address this issue, Rep. Bachus’ action makes it more likely that a resolution to this time-sensitive issue can be reached before the deadline.” [email protected]

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