Sept. 26, 2012 – A Financial Accounting Standards Board proposal aimed at providing investors more information about liquidity risk and interest rate risk “exemplifies the type of accounting rule that clearly should not apply to credit unions,” NAFCU Regulatory Affairs Counsel Tessema Tefferi said Tuesday.
The FASB proposal would impose new disclosure requirements relating to liquidity risk and interest rate risk in financial reports, including footnotes. Tefferi said credit unions should be exempt from the rule.
Tefferi, in Tuesday’s comment letter, said credit unions do not have investors, cannot participate in capital markets due to their inability to raise capital and do not provide financial statements to investors. Rather, he said, credit unions’ financial statements are “prepared for specific groups,” primarily NCUA.
In addition, credit unions have limited resources to work with that aren’t directly related to member service, he noted. As the FASB recognizes, the proposal “would impose new costs, costs that would be significant for all credit unions and which credit unions and their members should not have to bear,” Tefferi wrote.
He added that a vast majority of credit unions and their external auditors lack the expertise needed to implement the proposal and would need to hire new staff or expend more resources on qualified external auditors.
A rule issued recently by NCUA requires credit unions to adopt certain interest rate risk policies, but the requirements are based on the size and complexity of the institution. By contrast, the FASB “does not differentiate between types of entities, their complexities and their purpose,” Tefferi wrote. “Thus, the same accounting standards would apply to a small community-based credit union as to an international conglomerate.”
This is inappropriate, he said. “We strongly believe the one-size-fits-all approach is highly inadvisable and, in the case of application of the proposed standards to credit unions, unnecessary and without adequate justification.”
NAFCU’s comment letter is available online.