FASB Delaying Release of Merger Accounting Proposal

NORWALK, Conn.-The Financial Accounting Standards Board has announced that its anticipated exposure draft on merger accounting rules will be delayed until the second quarter of 2005. Patelco Credit Union Senior Vice President and Chief Financial Officer Scott Waite, who sits on an advisory council to FASB, pointed out that FASB initially planned on the changes going into effect Jan. 1, 2006 but with the delay of the exposure draft, the organization will revisit the issue during its March 30 board meeting. It is highly likely, the accounting changes would not become effective until June 2006, he said. "This is also good news in light of the `net worth' definition effort being spearhead by [Congressman Spencer] Bachus," Waite said. "I'm looking forward to the outcome of his upcoming hearing on the matter." The credit union trade groups have reported the hearing on the Net Worth Amendment For Credit Unions Act (H.R. 1042) will be on April 13. NCUA, which has supported the change, and FASB, which has not opposed it, will be testifying. FASB's proposed guidance will amend traditional merger accounting from the pooling method to the purchase method. Credit unions would be very negatively impacted by the change because the Federal Credit Union Act defines net worth as retained earnings and the purchase method would not allow merging credit unions to combine their net worth for accounting purposes. This would push many of the continuing credit unions into trouble with Prompt Corrective Action by artificially lowering their net worth. Bachus' bill would amend the credit union definition of net worth to read "the retained earnings balance together with any amounts that were previously retained earnings of any other credit union with which the credit union has combined." In addition to Bachus, a bipartisan group of credit union friends-Representatives Ginny Brown-Waite (R-Fla.), Tom Feeney (R-Fla.), Luis Gutierrez (D-Ill.), Darlene Hooley (D-Ore.), Paul Kanjorski (D-Pa.), Sue Kelly (R-N.Y.), Steve LaTourette (R-Ohio), Carolyn Maloney (D-N.Y.), Carolyn McCarthy (D-N.Y.), Dennis Moore (D-Kan.), Bob Ney (R-Ohio), Ron Paul (R-Texas), Rick Renzi (R-Ariz.), Ed Royce (R-Calif.), Bernie Sanders (I-Vt.), and Brad Sherman (D-Calif.)-are cosponsoring the bill. -scooke@cutimes.com