January 2012
At the NCUA's Board meeting on January 26th, the NCUA suggested in an Interpretive Ruling and Policy Statement that credit unions should be able to modify loans without having to immediately classify TDR loans as delinquent. Additionally, credit unions will not have to track each TDR loan's performance manually for six months, as is the current requirement. This IRPS could be final after the thirty day comment period.
September 2011
On September 15, 2011, the FASB issued Update 2011-08 “Testing Goodwill for Impairment”. The revised standard is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a "qualitative" assessment to determine whether further impairment testing is necessary. The revised standard allows an entity first to assess qualitatively whether it is necessary to perform the current two-step goodwill impairment test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. An entity can choose to perform the qualitative assessment on none, some or all of its reporting units. Moreover, an entity can bypass the qualitative assessment for any reporting unit in any period and proceed directly to step one of the impairment test, and then resume performing the qualitative assessment in any subsequent period.
The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. However, an entity can choose to early adopt even if its annual test date is before the issuance of the final standard, provided that the entity has not yet performed its 2011 annual impairment test or issued its financial statements.
June 2011
In a joint meeting this week, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) (the "boards") decided to change course on their proposed model for impairment of financial assets. The new approach attempts to address constituents' feedback on previous proposals. Instead of splitting the debt investment portfolio into two categories (the "good book" and the "bad book") as proposed earlier this year, the new approach would divide a portfolio into three categories, which will ultimately determine the timing and amount of the credit losses to be recognized. The assets allocated to each category will be based on their credit risk and any credit deterioration since their origination.
A complete summary of the boards' decisions on the financial instruments project is available on the FASB's website at www.fasb.org or the IASB's website at www.ifrs.org.
On June 16, 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. At the same time, the IASB issued an amendment to IAS 1, Presentation of Financial Statements. As the IASB had eliminated the option to present other comprehensive income within the statement of changes in equity in 2007, the changes under IFRS are more limited. The standards are intended to enhance comparability between entities that report under US GAAP and those that report under IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity's equity.
The new US GAAP requirements are effective for public entities as of the beginning of a fiscal year that begins after December 15, 2011 and for nonpublic entities for fiscal years ending after December 15, 2012 and interim and annual periods thereafter.
April 2011
On April 5, 2011 the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (Update) No. 2011-02, Receivables (Topic 310); A Credit Determination of Whether a Restructuring is a Troubled Debt Restructuring. This Update clarifies which loan modifications constitutes troubled debt restructurings and assist creditors in determining whether a modification of the terms of a receivables meets the criteria to be considered a troubled debt restricting, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. For non public entities, the amendments in the Update are effective for annual periods ending on or after December 15, 2012. The Update is available at www.fasb.org.
On April 22, 2011, the Financial Accounting Standards Board (FASB) issued an Exposure Draft of a proposed Accounting Standards Update (Update) intended to simplify how an entity is required to test goodwill for impairment. The amendments in this Update would allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The comment period for the proposed Update is June 6, 2011, and if approved, the Update would be effective for annual and interim goodwill impairment tests performed for the fiscal years beginning after December 15, 2011. The Exposure Draft is available at www.fasb.org.
January 2011
The National Credit Union Administration (NCUA) issued a new rule addressing the duties of federal credit union boards, which includes a financial literacy compliance requirement. Directors elected or appointed on or before January 27, 2011, including those directors serving prior to NCUA finalization of the rule, must be in compliance with the financial literacy requirements by July 27, 2011. Directors elected or appointed after January 27, 2011 must satisfy the financial literacy requirements within six months following seating. As part of the financial literacy requirements, all FCU directors, including existing directors, must have the ability to read and understand a credit union balance sheet and income statement. You can read the entire press release at http://www.ncua.gov/news/press_releases/2010/MR10-1222FCUDirector.pdf.
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