Nearman Maynard Vallez Auditing Services for Credit Unions

At Nearman, Maynard, Vallez, CPAs we believe a CPA firm should be a resource for credit unions.

Our newsletter, "The Auditor's Report," will help you stay abreast of changing regulatory and accounting pronouncements as well as provide other information to assist you in your duties. Our newsletter can be emailed to the Supervisory Committee, Board of Directors, and any members of Credit Union Management. You will also be able to download the newsletter from our website, www.nearman.com. If you are interested in receiving our newsletter via email, please send us an email to news@nearman.com to be added to our distribution list. Our objective is to keep you informed!

The material contained on this website is provided by Nearman, Maynard, Vallez, CPAs for information only. Use of these items constitutes an understanding that there may be omissions or inaccuracies in the content herein and that the authors and publishers are not engaging in providing online legal, tax, or accounting advice or other advice and services.

Information on this site is provided "as is" with no guarantee of accuracy or of the results obtained from the use of this information. Action should not be taken in reliance on the information contained in this website prior to consultation with a Nearman, Maynard, Vallez partner.


Charity Golf Tournament

On October 6, 2017, Nearman, Maynard, Vallez, CPAs sponsored and participated in LSCU’s Broward and Southernmost Chapters’ annual charity golf tournament. The tournament benefits the American Cancer Society and other local cancer charities. The Nearman team came in second place, just 2 strokes behind first place!

Broward and Southernmost Annual Charity Golf Tournament


New NCUA Directive

In response to the NCUA directive to obtain the audit reports directly from the auditors, we will now use the RIVIO system in order to share reports with you and the NCUA. The RIVIO system is a file sharing service provided by CPA.com, an AICPA company. This system provides a secured environment allowing you to share the report with third parties at no cost to you. Providing the report using the RIVIO system has been approved by the NCUA as an acceptable method for receiving the report.


Accounting Pronouncements and Industry Trends

  1. On June 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, “Financial Instruments-Credit Losses”, (Topic 326) (the ASU) requires an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination.

    The ASU requires credit unions to measure impairment on their existing loan portfolios based on the current estimate of contractual cash flows not expected to be collected. The estimate of expected credit losses is based on relevant information about past events, including historical loss experience with similar assets, current conditions, and reasonable supportable forecasts that affect the expected collectability of the assets’ remaining contractual cash flows. This new model is called the Current Expected Credit Loss (CECL) model.

    CECL requires credit unions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. Similar risk characteristics may include one or a combination of credit scores, risk ratings, collateral type, vintage, geographical location, term, or expected credit loss. Although the new accounting standard provides examples of similar risk characteristics, smaller and less complex institutions may conclude that the segmentation practices they have used under the incurred loss methodology are also appropriate under the expected loss methodology.

    CECL requires credit unions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. Similar risk characteristics may include one or a combination of credit scores, risk ratings, collateral type, vintage, geographical location, term, or expected credit loss. Although the new accounting standard provides examples of similar risk characteristics, smaller and less complex institutions may conclude that the segmentation practices they have used under the incurred loss methodology are also appropriate under the expected loss methodology. The implementation date for “private” companies, which includes credit unions, is for fiscal years beginning after December 15, 2020. Early application of the standard is permitted for fiscal years beginning after December 15, 2018.

  2. On February 25, 2016, the FASB issued ASU No. 2016-2 “Leases” (Topic 842). The ASU is intended to improve financial reporting about leasing transactions and affects all companies and other organizations. The ASU will require organizations that lease assets (referred to as “lessees”) to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.

    While the accounting by the lessor will remain largely unchanged from current GAAP, lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines.

    The effective date for credit unions is for fiscal years beginning after December 15, 2019. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented.

  3. In January 2016, The FASB issued ASU No. 2016-01 “Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities”, (Subtopic 825-10). The main objective in developing this Update is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information.

    The Update has two areas of interest to credit unions. One is the removal of the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. The other has a more significant potential impact.

    The ASU requires entities to record equity securities at fair value with adjustments to fair value recorded through the income statement. Currently many securities meeting the definition of an equity security are recorded as available-for-sale with fair value adjustments recorded as part of other accumulated comprehensive income. Securities meeting the definition of an equity security include any ownership interest in an entity. Credit unions with investments in mutual funds, stocks, limited partnerships, and trusts could see unacceptable levels of earnings volatility on their income statements. An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption.

    Removing the disclosure of fair value of financial instruments is available for implementation immediately upon issuance of the ASU. The effective date for the accounting for equity securities for credit unions is for fiscal years beginning after December 15, 2018. Credit Union’s may adopt this ASU early with fiscal years beginning after December 15, 2017.