CUNA Comment Letter

NCUA's Draft Accounting Manual for Federal Credit Unions With Less than $10 Million in Assets

September 30, 2002

Office of Examination and Insurance
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428

Dear Sir or Madam:

The Credit Union National Association appreciates this opportunity to comment on the agency’s draft Accounting Manual for Federal Credit Unions: for Credit Unions With Less than $10 Million in Assets (draft Manual). NCUA has rewritten the Manual in accordance with the statutory mandate in the 1998 Credit Union Membership Access Act (CUMAA) regarding accounting and financial reporting practices. Under CUMAA, credit unions with $10 million or more in assets are required to follow generally accepted accounting principles (GAAP) in the call reports they file with NCUA. Federal credit unions (FCUs) under $10 million are provided the draft Manual as a guide on NCUA’s regulatory accounting practices (RAP). FCUs having assets under $10 million also have the option of following GAAP. CUNA represents more than 90% of our nation’s 10,300 state and federal credit unions.

CUNA appreciates NCUA’s efforts to streamline and simplify its guidance on RAP for smaller credit unions, such as removing topics that are not relevant for smaller credit unions. The chapter with sample financial statements provided for general guidance on the financial statement reporting model an FCU under $10 million may wish to adopt will be particularly helpful for FCUs. We also support the agency’s work in updating the Manual, including changes to reflect CUMAA’s Prompt Corrective Action (PCA) approach for financial reporting.

CUNA would like to comment on the draft Manual in two specific areas. The first area involves the elimination of the familiar chart of general ledger accounts organization. The current Manual’s organization according to chart of accounts numbers was changed in the draft Manual because NCUA believes that the call reporting format and requirements should drive the credit union’s financial reporting mechanism rather than the chart of accounts. Under the draft Manual, FCUs may continue to use these chart of accounts numbers as they have in the past. Or FCUs now may develop their own chart of accounts numbering system for their general ledger accounts if they feel a new system would better facilitate call reporting. The draft Manual recommends that FCUs use a chart of accounts that closely mirrors the Call Report for ease of reporting. With the elimination of the chart of accounts, the organization of the draft Manual has changed. The draft Manual is organized to track financial statement reporting and is divided into the following sections: introduction, accounting basics for recording transactions, assets, liabilities, members’ shares and equity, income, and expenses. Some credit unions have told CUNA that they will continue to utilize the chart of accounts system. Other credit unions have voiced the concern to CUNA that this new organization may take some time to integrate given that many current national accounting computer systems and programs for credit unions are based on NCUA’s chart of accounts numbering system. Further, credit union staff and officials are accustomed to looking at and discussing accounting matters in that manner. Therefore, we suggest that NCUA provide a list of the chart of accounts numbers in an appendix to the Manual so that FCUs can continue to look up those numbers and refer to them in a user-friendly way.

The second area in which CUNA would like to comment is accounting for loan and lease losses (ALLL). We understand that NCUA intends to incorporate into the Manual its final Interpretive Ruling and Policy Statement (IRPS) on Allowance for Loan and Lease Losses Methodologies and Documentation for FCUs issued in May of this year, after the draft Manual had already been posted on NCUA’s website. Since the IRPS was issued, CUNA has received many questions from credit unions and the leagues on the new ALLL process. Consequently, we urge NCUA to make the section on ALLL in the final Manual as straightforward and detailed as possible so that credit unions understand how to comply with the IRPS. We recommend that the section contain some illustrations of how the new ALLL procedures would work. For example, under the new ALLL methodology, FCUs must identify loans to be evaluated for impairment on an individual basis under FASB Statement (FAS) No. 114, Accounting by Creditors for Impairment of a Loan, and segment the remainder of the portfolio into groups of loans with similar risk characteristics for evaluation and analysis under FAS 5. Credit unions are unsure as to whether some of those segments can be delinquent loans. It would helpful if the Manual would indicate “loan groups such as ….--

Thank you for the opportunity to share our comments. If you have any further questions, please contact Mary Dunn ( or Catherine Orr ( at our e-mail addresses or at (202) 638-5777.


Mary Mitchell Dunn
Associate General Counsel

Catherine Orr
Senior Regulatory Counsel