Congress Passes Corporate Bailout Bill
By: Gardiner Thomsen CPAs | email
Recently, Congress passed and the president signed into effect, a corporate bailout bill that impacts credit unions. This bill creates a Corporate Credit Union Stabilization Fund, essentially allowing the NCUA to borrow up to $6 billion from the Treasury in order to cover the losses suffered by U.S. Central Federal Credit Union and WesCorp Federal Credit Union.
On June 18, 2009, the Board of the NCUA approved a $1 billion payment to the National Credit Union Share Insurance Fund (NCUSIF) from the Stabilization Fund releasing the NCUSIF from its present obligations related to corporate stabilization actions. We would like to clarify what this means for the impairment that you have already recognized for 2008 or 2009, and why we are not reversing the entry and reissuing our financial statements.
Per Generally Accepted Accounting Standards, once an impairment is recognized it cannot be reversed. Rather, the Board of the NCUA has passed back income from the NCUSIF due to the payment from the Stabilization Fund. Then, they took the income passed back and used it as payment to recapitalize the NCUSIF Deposit.
Essentially, the NCUSIF paid the credit unions for their shares of the Stabilization payment, then collected that payment back in order to bring the NCUSIF Deposit back to the required 1% of insured shares. Per the NCUA Letter to Credit Unions for June 2009, an entry should be made in the second quarter to record the income received from the NCUSIF and the redeposit of those funds back to the NCUSIF.
The NCUA has also, based on new information, lowered the estimated premium expense from an expected .3% of insured shares to only .15% due in the later half of 2009. Therefore, the liability recognized should be written down to the updated estimate of .15% and the related expense recovered.
The bailout bill also extends the deposit insurance coverage of $250,000 for four years, until December 31, 2013. Along with extending the coverage, the NCUSIF will begin assessing the required NCUSIF deposit off of the $250,000 limit rather than $100,000 as in the past. If there are any questions or issues in regard to this recent legislation, feel free to contact us and we will discuss it in further detail.
