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 June 27, 2002 #02-33
E-mail: [email protected]

ACB COMMENTS ON ACCOUNTING FOR BRANCH ACQUISITIONS

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Editors, Reporters:

America’s Community Bankers has supported a proposal by the Financial Accounting Standards Board that would make the goodwill accounting now applicable to whole bank acquisitions available to the acquisition of branches that qualify as business combinations. ACB expressed concern over the proposed treatment of prior transactions because FASB would require all of the premium paid to be attributed to core deposit and customer relationship intangibles and continue to be amortized if the distinction between them were not made at the time of the transaction.

In its comment letter, ACB disagreed with FASB’s assessment that all of the intangibles in previous branch acquisitions were probably associated with customer relationships, including core deposit intangibles. In ACB’s view, some of the premium paid for branches may relate to other unidentifiable business opportunities (goodwill) that could arise from the purchase. Goodwill is not amortized, but instead is subject to periodic impairment testing. ACB suggested two alternatives. One would give institutions the option to review already completed transactions remaining on their books to make the distinction between customer relationships, including core deposit intangibles, and goodwill. The other would treat all intangibles as goodwill only if the distinction between identifiable and unidentifiable intangibles was not made and maintained since the transaction. This approach, ACB said, is “not any less logical than the presumption that all of the intangible assets are to be identified with customer relationships or as CDI.”

“We believe that the affected institutions must at least have the option to review the transactions if the only other alternative is presumption that goodwill did not exist in the completed transactions,” ACB said. “It would place such institutions at a disadvantage in terms of reported earnings and perhaps stock price valuations as well.”

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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