WASHINGTON-CUNA has issued a comment call seeking member inputconcerning the Financial Accounting Standards Board's exposuredraft on merger accounting for credit unions and mutualinstitutions. The proposal would eliminate the use of the poolingmethod of accounting in business combinations in favor of thepurchase method, which could inadvertently put credit unions injeopardy with Prompt Corrective Action. The problem is that the networth, defined as “retained earnings” only for credit union capitalpurposes, of the merging institutions would become “acquiredequity” of the surviving institution for merger accounting purposesand, therefore, not count toward net worth. The healthy survivingcredit union could then be subject to PCA. Legislation, the NetWorth Amendment for Credit Unions Act (H.R. 1042) and the CreditUnion Regulatory Improvements Act (H.R. 2317), is currently inCongress to resolve the issue after the credit union trades andFASB have been unable to reach an agreement. Specifically, CUNA'srequest for comments is focused on whether the guidance fordetermining fair value, as will be necessary under the purchasemethod, will be effective and useful and how it can be improved.CUNA's Accounting Task Force and CFO Council will be reviewing thecomments it receives and working on an umbrella comment letter.CUNA is asking for comments by Oct. 7. FASB plans to holdroundtable meetings at its Connecticut headquarters Oct. 27, 2005and comments are due by Oct. 28, 2005. The board expects to issueits final guidance in mid-2006 with an effective date of Jan. 1,2007.