ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release November 28, 2001 #01-84
E-mail: [email protected]

ACB SUGGESTS APPROPRIATE ACCOUNTING FOR MERGERS OF MUTUAL SAVINGS INSTITUTIONS

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ASHINGTON, D.C. — America’s Community Bankers has provided its views to the Financial Accounting Standards Board on the appropriate accounting for mergers of mutual savings institutions under the new purchase accounting method. A transition period was requested.

ACB is seeking interpretative guidance on how to apply the business combinations accounting standard, SFAS 141, which eliminated pool accounting, to accounting for mergers of mutuals where no explicit consideration is paid to the acquired institution.

ACB said that in applying purchase accounting to mergers of mutuals, estimates of fair values of both assets acquired and liabilities assumed should be calculated, but no portion of excess net assets should be allocated to a pro rata reduction in asset values.

The excess net asset value should be recognized, in whole or in part, as extraordinary income up to the pre-existing book value of the equity of the acquired institution. Excess net assets remaining above the acquired institution’s book value should be treated as “other comprehensive income” and amortized into net income over an appropriate period of time.

ACB said that obligations created by the merger that would not otherwise exist should be recognized as liabilities. The obligations are not necessarily a purchase price, ACB said.

ACB urged FASB to allow existing negative goodwill created by previous mutual combinations to be accreted into income over its remaining term.

The comment letter is attached.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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