FOR IMMEDIATE RELEASE
Ohio Community Banker Voices Concerns Over FASB Accounting Proposal at Yesterday's Meeting
Washington, D.C. (October 13, 2010)-Independent Community Bankers of America (ICBA) Treasurer Jack Hartings, president and CEO of The Peoples Bank, Coldwater, Ohio, represented the nation's Main Street community banks during a meeting yesterday with the Financial Accounting Standards Board (FASB). The roundtable was the first discussion of the proposed accounting treatment for financial instruments and its impact on private and not-for-profit companies. ICBA has continued to voice its objection to the proposal since it was first announced.
"As a long-time community banker, I was extremely pleased to represent ICBA and express my thoughts on FASB's proposal at yesterday's meeting," said Hartings. "Community banks fund their operations by taking deposits and holding loans for the long term. The accounting that would result if this proposal went forward would greatly misrepresent the operations of Main Street community banks like mine, and many other financial institutions, whose primary business practice is to hold financial instruments to collect contractual cash flows-not to trade them on a regular basis."
Community banks are not in the business to create or purchase assets or liabilities for quick resale and FASB's proposal, which would "mark to market" most financial instruments, would not reflect this business model.
The panel, which consisted of bankers, analysts, auditors and representatives of nonfinancial private companies and not-for-profits, was generally unified in its opposition to using fair value to measure financial instruments held for the long term. Panelists discussed with FASB members and staff aspects of the proposal, including how to account for impairments and set the allowance for loan losses
Hartings told FASB that not all impairments result in losses and that statement preparers need to consider information about the future, not just consider one point in time when making assessments. FASB's proposal assumes economic conditions at the end of the reporting period are "frozen" for the remaining life of the instrument and forecasts of future events may not be considered. He also raised concerns about the high costs of FASB's proposed accounting changes versus the questionable benefits it offers to private company owners.
For more information, and to read ICBA's recent comment letter to FASB, visit http://www.icba.org/.