NASCUS Comment Letter on FASB Reemphasizes its Position on Mergers

ARLINGTON, Va. – NASCUS used its comment letter filed with the Financial Accounting Standards Board Oct. 27 on the latest exposure draft of FASB 141, Business Combinations to reemphasize its position on business combinations the association expressed in its earlier Oct. 25, 2001 comment letter to FASB. In its Oct. 27 comment letter, NASCUS’ conclusions regarding business combinations remain unchanged from its earlier position – the association maintains that purchase accounting is not the best accounting method for business combinations between credit unions. In its exposure draft, FASB asks if the definitions of a business combination are appropriate for all business combinations. NASCUS explains that credit unions have many distinctive characteristics that differentiate them from business combinations between those of mutual enterprises and investor-owned entities – CUs are cooperatively and democratically owned and lack market value of member/owner interests, NASCUS states. “As we stated in our October 25, 2001 comment letter, credit unions typically do not pay consideration in merger transactions, making the acquisition accounting method non-sensible for credit unions,” the Oct. 27th letter states. In addition, NASCUS explains that in many cases, CU business combinations are entities of similar size, making it sometimes challenging to determine the acquiring institution. Among other recommendations, NASCUS encourages FASB to consider the sum of net assets approach, often referred to as the fresh start method, for some credit union business combinations.