Newsroom

June 29, 2015

NAFCU welcomes FASB prepaid proposal, seeks more guidance

NAFCU Regulatory Affairs Counsel Alexander Monterrubio on Monday welcomed the Financial Accounting Standards Board's prepaid card exposure draft as an important step towards creating standards in an area left largely undefined and in need of formal guidance.

FASB's proposal offers two concurrent standards for how issuers should derecognize the liability for unused portions of prepaid cards that do not expire and are not subject to unclaimed property laws. The proposed standards deviate based on whether or not the issuer expects to be entitled to breakage amount.

"NAFCU supports the continuation of the default rule for derecognition of a liability and the creation of a narrow exemption for specific types of prepaid stored-value cards," Monterrubio wrote. However, he recommended FASB "provide further clarification or additional guidance that may be used by those charged with applying these accounting standards."

Monterrubio also encouraged that any disclosure requirements for issuers relating to prepaid stored-value cards be "reasonable and provide appropriate exceptions for the compliance of smaller institutions, which can be heavily burdened by compliance costs."