Statements of Position



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This proposed Statement of Position (SOP) reconciles and conforms, as appropriate, the accounting and financial reporting provisions established by the AICPA Audit and Accounting Guides Banks and Savings Institutions, Audits of Credit Unions, and Audits of Finance Companies. The proposed SOP also explicitly incorporates mortgage companies and corporate credit unions in its scope. The final SOP will be incorporated in a new AICPA Audit and Accounting Guide, which will supersede the existing Guides.* The AICPA Industry Audit and Accounting Guides fall into category (b) of generally accepted accounting principles (GAAP) in the hierarchy established by AICPA Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report. In reconciling the accounting and reporting principles established by the three existing Guides, this proposed SOP specifies provisions that are: 1. Applied authoritatively for the first time to a kind of entity not previously subject to such provisions. 2. Eliminated for an entity previously subject to a provision in lieu of applying it for the first time to other entities. 3. Unique to a kind of entity and its practices and preserved for that kind of entity but not applied to other kinds of entities. As discussed further in the Appendix, this proposed SOP is part of a larger AICPA project designed to merge the three Guides. This broader project involves several other reconciliations of materials in the former Guides, as follows: 1. Reconciliation of general information in the Guides; 2. Reconciliation of auditing guidance in the Guides; 3. Reconciliation of the descriptions of "category a" or "higher level" GAAP in the Guides; 4. Reconciliation, where appropriate, of the sample financial statements in the Guides. These latter reconciliations will occur through conforming changes to the existing Guides at the time that the Guides are actually merged. In this proposed SOP, the Accounting Standards Executive Committee (AcSEC) modified certain accounting and reporting provisions established by the existing Guides. These modifications will be carried forward to the new Guide. These modifications include the following: 1. Accounting guidance for sales of servicing rights related to loans retained was modified to follow the revenue recognition model of Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 95-5, Determination of What Risks and Rewards, If Any, Can Be Retained and Whether Any Unresolved Contingencies May Exist in a Sale of Mortgage Loan Servicing Rights, and the "basis allocation" approach used in FASB Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. (See paragraph 6j of this proposed SOP.) 2. Accounting guidance for purchases of receivables and factoring commissions is clarified to indicate applicability of FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, to these transactions. (See paragraph 8d of this proposed SOP.) 3. Disclosure of the entity's policy for classification and method of accounting for interest only strips and other instruments covered by paragraph 14 of FASB Statement No. 125 is added. (See paragraph 9c of this proposed SOP.) 4. Disclosure of the nature, terms, and extent of financial instruments with off-balance-sheet credit risk, except for those instruments already within the scope of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, is added. (See paragraph 9f of this proposed SOP.) 5. Disclosures related to foreign banking organizations, trust operations, and business combinations, are added to existing regulatory capital disclosure requirements for banks and savings institutions. (See paragraph 10 of this proposed SOP.) 6. Disclosure of the amount of loans past due ninety days and still accruing, and the entity's policy for determining past due status is added. (See paragraphs 13b and 13a(3) of this proposed SOP.) This proposed SOP will be the only document exposed for public comment in connection with the preparation of the combined Guide. The remainder of the process of preparing the combined Guide will involve only conforming changes. The proposed SOP eliminates differences in accounting established by the Guides among financial institutions (that is, banks, credit unions, finance companies, and savings institutions), where such differences are not warranted. The proposed SOP also explicitly incorporates mortgage companies and corporate credit unions in its scope. It carries forward accounting guidance for transactions unique to certain financial institutions. A summary of these matters follows. Most of the differences between the respective Audit Guides represent presentation or disclosure requirements. One of the more important differences involves disclosure about regulatory capital requirements. The Guide for banks and savings inst 6af itutions requires these disclosures, but the Guide for credit unions does not. Under the proposed SOP, regulatory capital disclosures will be required for credit unions. Many of the other presentation and disclosure differences are similarly reconciled.

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Financial institutions -- Accounting -- Standards -- United States; Loans -- Accounting -- Standards -- United States; Asset-backed financing -- Accounting -- Standards -- United States; Accounts receivable -- United States


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed statement of position : Accounting by certain financial institutions and entities that lend to or finance the activities of others ;Accounting by certain financial institutions and entities that lend to or finance the activities of others; Exposure draft (American Institute of Certified Public Accountants), 2000, May 30



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