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ICBA Urges FASB to Halt Split-Dollar Accounting Guidance

Washington, D.C. (August 4, 2006)—The Independent Community Bankers of America (ICBA) asked the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force to pull back its proposed guidance for, "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF Issue No. 06-4)."

"ICBA strongly disagrees with the proposed draft abstract as we do not believe that it truly reflects the nature of the arrangements," the association said in a comment letter to FASB. "Rather, it misconstrues the financial aspects of the transaction and infers an obligation that does not exist, providing misleading information to financial statement users."

The proposal would require employers to accrue a liability and record compensation costs for the split-dollar insurance death benefit payable to an employee's beneficiary, causing a hit to capital for community banks that offer these plans. An employer does not make payments to beneficiaries and is never obligated to backup or guarantee a death benefit in the type of endorsement split-dollar arrangements community banks typically enter into.

ICBA also urged a one year delay of the implementation date so community banks can review their arrangements and determine if they want to continue them or abandon them, if the guidance goes forward. Should they wish to retain them, the accounting change could have a material effect on their income and regulatory capital position.

Read the full comment letter on www.icba.org.