Depository Institutions Expert Panel

Transcription

1 Financial Reporting Center Industry Insights Depository Institutions Expert Panel Highlights of the December 2, 2011, Meeting The Depository Institutions Expert Panel serves the needs of AICPA members on financial and business reporting and audit and attest matters. The expert panel protects the public interest by bringing together knowledgeable parties in the depository institutions industry to deliberate and come to agreement on key depository institutions issues. The following are the brief highlights of the December 2, 2011, meeting for the Depository Institutions Expert Panel (DIEP) and the Joint Meeting with the Federal Financial Institutions Examination Council (FFIEC). HUD The DIEP listened to a presentation by Jean Joy, former Chair of the DIEP, Mandy Nelson, KPMG and Mary Folester on issues and problems related to HUD audits. Many issues remain unresolved, in particular the LASS Electronic Filing. This is a pre-populated schedule that is based on a commercial company financial statement and does not fit the banking model. Therefore bank input to the LASS models will continue to trigger problems because it does not conform to the banking model. The DIEP agreed to form a working group, chaired by Todd Sprang, to assist in working with HUD to resolve these issues. DIEP members agreed to send the names of possible members from their firms and an invite will also be extended to Harrison Greene. A webinar would be developed to alert practitioners to the potential problems. A webinar was held on January 6 with a re-broadcast and had wide participation. Subsequent to the meeting a working group has been formed to address the HUD issues. Reverse Mortgage Securitization A large majority of these loans are sold to Ginnie Mae. A question was raised as to whether under the current structure you can achieve sale accounting. The SEC did rule and said that you could not achieve sale accounting. Questions are being asked about how to handle past transactions. Discussions have begun to fix the structure so that achieves sale accounting.

2 Financial Reporting Center Industry Insights Depository Institutions Expert Panel Highlights of the January 6, 2012, Conference Call The Depository Institutions Expert Panel serves the needs of AICPA members on financial and business reporting and audit and attest matters. The expert panel protects the public interest by bringing together knowledgeable parties in the depository institutions industry to deliberate and come to agreement on key depository institutions issues. The following are brief highlights of the conference call: HAMP Trial Modifications A group of banks represented by The Clearing House (TCH) submitted a Request for Pre-clearance letter to the SEC staff with regard to when loans modified under the Home Affordability Modification Program (HAMP) would meet the criteria to be classified as TDRs. In a subsequent confirmation letter sent to the SEC staff, The Clearing House noted that the lender is considered to have granted to the borrower a modification with a contingent concession that qualifies as a TDR at the start of the HAMP trial period when there is a legally binding obligation to the borrower on the part of the lender. Most banks have interpreted this to be on the day that a letter is sent to the borrower notifying the borrower of his/her acceptance into the HAMP Program, contingent upon successful completion of the trial period. This guidance is effective for HAMP loans entering the trial period beginning January 1, 2011 and after. Although the SEC s determination only applies to trial modifications executed under the HAMP program, most banks have analogized this determination to other proprietary and government programs with trial periods. TDRs It was noted that the SEC staff expected robust disclosure in the impairment footnote. There have been on-going discussions with the SEC staff as to the circumstances, if any, that a loan could be removed from TDR status. FASB/IASB Financial Instruments Project Linda Bergen led a discussion on the FASB Financial Instruments Project, specifically the impairment piece. They are still considering a 3 bucket model with movement between the buckets based on credit deterioration.

3 In a related matter the IASB has re-opened for discussion the IASB s classification and measurement guidance in order to permit convergence with the FASB. Subsequent to this call, the FASB/IASB agreed to add a joint project on classification and measurement as part of the broader financial instruments project. Many operational issues still need to be resolved and terminology clarified. Next Meeting The next DIEP only conference call with be held on April 17. DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2012 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC

4 Financial Reporting Center Industry Insights Depository Institutions Expert Panel Highlights of the April 17, 2012, Conference Call The Depository Institutions Expert Panel serves the needs of AICPA members on financial and business reporting and audit and attest matters. The expert panel protects the public interest by bringing together knowledgeable parties in the depository institutions industry to deliberate and come to agreement on key depository institutions issues. The following are brief highlights of the conference call: EITF Issue 12c and SOP 03-3 Tom Canfarotta reported that the FASB had issued the EITF issue for a 90 day comment period. The consensus view A is consistent with predominant practice. The consensus is limited to government assisted acquisition and Tom will chair the working group to prepare the FinREC comment letter. In other SOP 03-3 related matters, it was noted that the OCC had issued a new version of the Bank Accounting Advisory Series (BAAS) but it did not address SOP 03-3 and pool formation. The OCC is wants the pool formation to be granular enough to take into account credit risk. It was observed that institutions wanted to change from SOP 03-3 to SFAS No. 91 by analogy but it is not clear how the SEC staff would view this decision. Loan Issues It was observed that the OCC is now informally suggesting (although not formally suggesting and not requiring), that if a first trust deed loan is on nonaccrual, that the second trust deed loan also be placed on nonaccrual, regardless of the delinquency status of the second. Several large banks will adopt this policy for the first quarter of Additionally, the OCC has contacted individual banks and told them that if, as part of a Troubled Debt Restructure of a loan, a loan is modified where there is principal forgiveness, and the loan must be placed on nonaccrual until the borrower evidences a sustained period of performance. The DIEP decided to put this on the agenda for the joint DIEP/FFIEC meeting on May 21 for further discussion. Issues were raised about the need to ask the banking regulators to clarify what is meant by a collateral dependent loan. Field examiners may be applying the definition in more circumstances than warranted. This will be put on the agenda for the joint DIEP/FFIEC meeting on May 21.

5 FASB Projects Reverse-repos: Under proposal repos will be treated as secured financings. Financial Instruments: At a recent meeting, the FASB/IASB agreed to permit debt securities to be measure at amortized cost. Revenue Recognition: The main scope issue could relate to credit cards and whether they are included in the scope. Some have taken the position that revenue recognition exclude financial instruments from its scope so that credit card rewards program would most likely be outside the scope also. Next Meeting The next meeting will be May 21 and May 22 in Washington DC. The first day will be a joint FFIEC/DIEP meeting at Citicorp s DC offices. The second day the DIEP will meet with the SEC staff from 9-11 followed by a working lunch and debrief at the AICPA offices in Washington DC. DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2012 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC

6 HAMP Loan Modification Questions have arisen about loans modified on a trial basis, as to whether they are TDRS at the beginning or conclusion of the trial period. The SEC was expected to (and did rule in December) that the loan was a TDR from the beginning of the trial period. Other A working group was formed to continue to discuss issues related to SOP Many were expected to be addressed in the FASB s impairment project but the delay in the completion of that project leaves many issues to be addressed. The new credit quality disclosures may be difficult for many nonpublic banks. The FFIEC is working on guidance on Junior Lien Loans/HELOC and the ALLL. The next joint meeting will be held in the Spring. DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2012 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC

7 Financial Reporting Center Industry Insights Depository Institutions Expert Panel Highlights of the April 9, 2014, Conference Call The Depository Institutions Expert Panel serves the needs of AICPA members on financial and business reporting and audit and attest matters. The expert panel protects the public interest by bringing together knowledgeable parties in the depository institutions industry to deliberate and come to agreement on key depository institutions issues. The following are brief highlights of the conference call: Call participants Sydney Garmong, Chair (Crowe) Hugh Guyler (Deloitte) Teresa Brennan (AICPA Staff) John Reiger (US Bank) Mike Lundberg (McGladrey) Brad Davidson (Crowe) Tom Canforatta (KPMG) Todd Sprang (CLA) Lee Keel (Wells) Chip Currie (PwC) Dom Guiffrida (Deloitte) Jamie Mayer (Grant) Aubrey Thacker (Capital One) Randy Morse (AHPPLC) Greg Talbott (Kinecta) Steve Morehart (BDO) Absent Xihao Hu (TD Bank) Linda Bergen (Citi) Barry Pelagatti (BDO) Agenda topics: 1. Proposed Accounting Standards Update Receivables Troubled Debt Restructurings by Creditors (Subtopic ): Classification of Certain Government-Guaranteed Residential Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force) 2FDocumentPage&cid= The FinREC chair serves as an observer at EITF meetings. Rather than submit a comment letter, the practice has been to provide talking points to the FinREC representative for

8 consideration at the applicable EITF meeting. A document containing draft responses to the proposal s questions was distributed to the DIEP to facilitate discussion. Given the comment period closes April 30, 2014, the DIEP should finalize our comments prior to the next call. Action item: DIEP members were asked to review the draft responses and provide feedback by Friday, April 18 th. 2. Financial Instruments Project The DIEP discussed recent decisions made by the Board, including acquired loans and TDRs. The Panel explored possible ways it could offer to be helpful to the FASB, which might include offering assistance with implementation guidance. The Panel plans to discuss further next steps. Action item: A separate call to discuss this issue was scheduled for Monday, April 14, 2014 at 2 pm. 3. FAS 166 A practice issue was added to the agenda regarding commercial mortgage loan structures. In some arrangements, the debt is structured into two notes: one note is retained by the issuer and the other could be sold or securitized. There is generally a co-lender agreement in place. These types of structures have been occurring in nonbank and are becoming more prevalent and could occur in depository institutions. The question posed is whether the structure represents two separate notes or a type of loan participation. Action Item: Topic added to May meeting agenda. 4. Volcker Rule On April 7, 2014, the Fed announced its intension to exercise its authority to give banking entities two additional one-year extensions to conform their ownership interests in and sponsorship of certain collateralized loan obligations (CLOs). DIEP is watching for the market reaction following this announcement. Members noted Dec. 31 st 10-K filings generally included disclosures about risk of divestures. DIEP members sense a slowdown in time and effort spent on Volcker, speculating either because all impressible investments have been identified or because uncertainty on the scope remains. Action Item: Continue to monitor this issue. 5. BASEL Committee Guidance, External audit of banks, Issued on March 31, In addition to the guidance, the Committee published a letter to the International Auditing and Assurance Standards Board (IAASB) on areas where it believes International Standards on Auditing could be enhanced. Action Item: Include on the agenda for the May meeting to discuss with regulators. 6. GNMA Subcontract Servicers Follow up discussion from March call Action Item: Table discussion to May meeting 7. AICPA Audit Guide The review period for changes to the guide will begin in the next few weeks.

9 8. Administrative Notes The Wednesday, May 14, 2014 monthly DIEP call was moved to Tuesday, May 13, 2014 at 10 am. 9. Call was adjourned at 10:10 am. DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2014 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC

10 Financial Reporting Center Industry Insights Depository Institutions Expert Panel Highlights of the August 13, 2014, Conference Call The Depository Institutions Expert Panel serves the needs of AICPA members on financial and business reporting and audit and attest matters. The expert panel protects the public interest by bringing together knowledgeable parties in the depository institutions industry to deliberate and come to agreement on key depository institutions issues. The following are brief highlights of the conference call: Call participants Absent Sydney Garmong (chair) Brad Davidson Robert Sledge John Klinge Robert Kianos Dom Guiffrida Hugh Guyler Tom Robinson Barry Pelagatti Mike Lundberg Randy Morse John Rieger Xihao Hu Greg Talbott Crowe Crowe KPMG KPMG PwC Ernst Deloitte Deloitte BDO McGladrey AHPPLC US Bank TD Bank Kinecta Lee Keel Todd Sprang Chip Currie Tom Canforatta Wells Fargo CLA PwC KPMG Agenda topics: 1. FASB s Financial Instruments Project: Credit Impairment a. FASB staff Stephen McKinney provided an update on the project. b. Discussion i. Impairment will be discussed at the board meeting scheduled this afternoon two main topics include 1. The applicability of the CECL model for debt securities 2. The roundtable and other outreach ii. Issues left to address include implementation guidance, disclosures, transition and effective date. iii. Stephen is returning to Deloitte this week. With Stephen s departure, Jack Pollman, practice fellow from KPMG, will be leading project. 2. Sales of HTM securities for BASEL 3 and tainting implications discussion a. Questions on sales of HTM securities in contemplation of BASEL 3 are being posed

11 b. Fundamental question was posed: Does the guidance in ASC paragraph (f) trump all other guidance or do the facts and circumstances bear on the conclusion? c. Need to continue to monitor and revisit 3. Application of PCC alternatives for call reporting update and implementation issues discussion a. Banking regulators have informally signaled their intent to allow the use of the PCC alternatives for call reporting purposes. b. Possible implementation issues i. Will banks be allowed to retroactively adopt? ii. A bank which does not meet the definition of a public business entity (PBE) elects a PCC alternative such a goodwill amortization. Several years later, the bank becomes a PBE because the bank has grown and has assets >$500 million. [Most non-mutual, non-s-corporation banks over $500M are considered to be a PBE.] What is the proper treatment at the point the bank is deemed to be a PBE? 1. No impact, continue amortizing goodwill 2. Restate 3. Cease amortization and freeze the goodwill 4. Other accounting 4. Administrative Setting a date for the fall Washington meeting a. This fall meeting will be a transition meeting with both the incoming members and thanking the outgoing members for their time, dedication and great service. b. Teresa Brennan (AICPA publications) had a baby boy!!!! DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior committees of, and does not represent an official position of, the American Institute of Certified Public Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright 2014 by American Institute of Certified Public Accountants, Inc. New York, NY All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please copyright@aicpa.org with your request. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, 220 Leigh Farm Road, Durham, NC