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March 14, 2013 – The Financial Accounting Standards Board recently released two accounting standards updates and three proposed updates that NAFCU wants to draw credit unions' attention to.

FASB's accounting standards update, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, is aimed at bringing more consistency to how entities record liability obligations resulting from joint and several liability arrangements.

The guidance instructs entities on how to recognize, measure and disclose these obligations in cases where the total amount of the obligation is fixed at the reporting date. The guidance does not pertain to obligations already addressed by U.S. generally accepted accounting principles.

The other accounting standards update, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, is aimed at improving the reporting of reclassifications out of accumulated other comprehensive income.

The amendments in the update require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income.

The three proposed rules are:

• Proposed Accounting Standards Update: Financial Instruments: Credit Losses (Subtopic 825-15). The proposed amendments would require an entity to impair its existing financial assets on the basis of the current estimate of contractual cash flows not expected to be collected as of the reporting date, removing the previous "probable" threshold for recognizing credit losses under U.S. GAAP and broadening the range of information an entity must consider in measuring its allowances for expected losses. NAFCU will be issuing a Regulatory Alert on this proposal soon.
• Proposed Accounting Standards Update: Financial Instruments: Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This update provides guidance creating a comprehensive framework for the classification and measurement of certain financial instruments, based on the instruments' characteristics, eliminating and harmonizing certain existing reporting schemes. NAFCU will also be issuing a Regulatory Alert on this proposal in the near future.
• Proposed Accounting Standards Update: Transfers and Servicing (Topic 860): Effective Control for Transfers with Forward Agreements to Repurchase Assets and Accounting for Repurchase Financings. The proposed amendments would require that entities engaging in repurchase agreements and similar securities lending transactions meeting certain criteria account for the transactions as secured borrowings. It would also require entities to assess transactions not meeting certain criteria to determine if they should be accounted for as secured borrowings or sales and forward repurchase agreements. NAFCU has already issued a Regulatory Alert on this proposal and is encouraging members to weigh in. Comments are due to NAFCU March 18.

NAFCU is encouraging members to comment on these proposals as it continues to advocate for credit unions and seeks to mitigate the regulatory burden they face. The association will be issuing comment letters on all three of the above proposals.