Bachus Supportive of “Net Worth” Definition Change

January 6, 2005

House Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus told NAFCU lobbyists yesterday that he was supportive of the suggested change in definition of net worth in response to proposed changes in merger accounting. As the Financial Accounting Standards Board changes merger accounting from the 'pooling' method to the 'purchase' method, credit union mergers could grind to a halt. Under the purchase method, the surviving credit union could not count the merged credit union's net worth towards its own and could place the credit union in trouble under Prompt Corrective Action. Credit unions would like to change the definition of net worth from 'retained earnings' to 'equity' in order to resolve this issue and FASB said it had no problem with the legislative fix. NAFCU Director of Legislative and Political Affairs Brad Thaler said Bachus "thinks they can tackle this in the 109th Congress." The proposed FASB changes are expected to become effective Jan. 1, 2006.

Reprinted with permission of Credit Union Times