U.S. Central OTTI to spur corporate adjustments

Sept. 17, 2009 – All corporates invested in U.S. Central FCU are likely to record a “substantial impairment” in reports due Nov. 30 in keeping with generally accepted accounting principles, according to a letter Wednesday from the NCUA Office of Corporate Credit Unions.

The letter to corporates addresses U.S. Central’s 2008 audited financial statements, released last week. These discuss a full depletion of paid-in capital and a 63.7 percent depletion of member capital accounts as of this June 30. Each corporate that is a U.S. Central member is being instructed to determine if its U.S. Central capital assets have experienced other-than-temporary impairments requiring financial statement recognition and measurement.

To that end, OCCU is directing corporate credit unions to do the following:

• Consult with their licensed independent accountants regarding the recognition of any impairment from U.S. Central capital accounts, and regarding the need to restate any earlier financial reports.
  
  
• If losses associated with the depletion at U.S. Central create a retained earnings deficit at any quarterly or annual reporting period, deplete contributed capital as needed to replenish retained earnings to zero (in accordance with Part 704.2 of the NCUA Rules and Regulations).
  
  
• If needed, submit revised 5310 Call Reports.

“The above actions are to be accomplished with the issuance of your corporate credit union’s October 31, 2009, regulatory reports and submitted by no later than November 30, 2009,” the letter states. OCCU will monitor corporates’ efforts to comply, it notes.

The OCCU included a copy of an Aug. 18 letter that addressed OTTI related to mortgage-backed securities with yesterday’s letter.