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Ever since May 13, when U.S. Central Federal Credit Union released first-quarter financials that showed it had exhausted only 23% of its member capital accounts, not 63% as reported by the NCUA two weeks prior, both corporates and natural person credit unions have been scratching their heads over how to best record the evolving losses on their balance sheets.In a Letter to Credit Unions released May 22, the NCUA stressed its original credit-loss estimate, which includes a 63% MCA impairment, has not changed; rather, “discounting the cash flows from these losses in accordance with GAAP results in a reduction in other-than-temporary-impairment charges to $1.8 billion,” the agency stated in the letter, 09-CU-10.NCUA Director of Public and Congressional Affairs John McKechnie called U.S. Central’s losses “a moving target” and said the regulator still expects U.S. Central’s MCA losses to eventually reach 63% impairment.Leigh Philibosian, senior vice president of marketing at the $3 billion Mid-Atlantic Corporate Federal Credit Union, said her institution is “kind of in limbo” over the difference between the two U.S. Central MCA loss figures. Mid-Atlantic Corporate had $49.5 million in PIC and $95 million in MCA at U.S. Central; the difference between a 63% and 23% MCA loss represents $47 million on Mid-Atlantic’s books.Scott Waite, senior vice president/chief financial officer of Patelco Credit Union, said Philibosian’s “in limbo” description is fitting because the complexity and change involved in determining losses have made auditors, regulators and even the AICPA avoid taking a definite position. In addition to his credit union day job, Waite also serves on a Financial Accounting Standars Board advisory board and CUNA’s accounting task force.Normally confident CPA firms are deferring to the NCUA, Waite said, but the regulator “isn’t an authority on GAAP.” AICPA’s decision that credit unions could record corporate stabilization costs in 2008 or 2009, depending upon their audit firm’s interpretation, has contributed to the overall sense of confusion regarding appropriate accounting treatments, he said.“Frankly, I’ve been frustrated with it because I receive a lot of calls from credit unions asking my opinion,” Waite said. “I’m comfortable giving my opinion, but I don’t see a consensus, and that bothers me. It seems to me credit unions just want to know whether to march left or right. They’re saying, ‘We might disagree with the decision, but we want to at least all march in the same direction.’”Another big question for retail corporates and their members is whether or not U.S. Central’s losses cut deep enough to affect the capital natural person credit unions have invested them, and if so, how much?Philibosian said it’s up to Mid-Atlantic’s audit firms to decide whether the corporate’s decision to apply $98 million of its retained earnings to U.S. Central-related losses will hold. That figure leaves $26.5 million in retained earnings and member capital shares intact; however, Philibosian said, “if the CPA firms look at the potential for future losses, they might still say to take the full impairment,” which would result in an MCS loss for Mid-Atlantic members.“The point is nothing has been decided yet,” she said, adding that Mid-Atlantic’s CPA firm, McGladrey & Pullen LLC, is waiting for final, audited U.S. Central financials in order to make its final determination.Brian Hague, president/CEO of Kansas City-based and credit union-owned CNBS, called the question of whether or not to reverse previously announced U.S. Central losses “nothing but a matter of timing.” CNBS provides investment brokerage and portfolio management service to natural person credit unions, and Hague said he thinks many will make quarter-by-quarter changes as U.S. Central and other retail corporates update their investment portfolio values quarterly.Confusing matters further was the successful passage of the Corporate Credit Union Stabilization Fund Act, which will allow natural person credit unions to spread emergency NCUSIF premiums out over seven years. Waite said he’s “hopeful” credit unions will be able to reverse the entire 1% share insurance premium and impairment if they’ve already taken it because balance sheet relief was the intent of the bill.Waite said he’s waiting for the NCUA to release guidance, and said he will work with CUNA’s accounting task force to provide the trade association’s summary soon after. He anticipated the regulator will release guidance within the next week.“I don’t believe it will even be a month down the road, because everybody’s waiting,” he said. “The agency knows there’s a sense of urgency.”–[email protected]

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