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WASHINGTON – How loan participations should be conducted to qualify for accounting treatment as a sale continued to be a priority for the Financial Accounting Standards Board (FASB) this year. The latest FASB statement issued in October was an improvement over a 2003 version, CUNA said, but more tweaking is needed. NAFCU has also provided feedback on the treatment. The current version eliminates a concern that “rights of setoff” and obtaining “true-sale-at-law” opinions would prevent the more favorable sales accounting treatment, as the 2003 plan would have done. Both trade groups have requested revising the definition of participation interest to enable loans with limited recourse to achieve sales accounting treatment, a change that would help institutions avoid the costly and time-consuming process of setting up and running a special purpose entity (SPE). FASB should also make prospective the requirement that loan participation transactions with recourse shown on an institution’s books as a sale must be retroactively recharacterized as a secured borrowing upon issuance of the final rule, said CUNA. Finally, CUNA said FASB should allow for a one year transition/effective date in order to allow institutions time for implementation of the rule, including establishment of an SPE.

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