Wiley GAAP 2008

Concepts, Rules, and Examples

Justifying a Change in Accounting Principle

The following sources are preferred for banking and thrift industries that must justify a change in accounting principle:

1. AAG, Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies and Mortgage Companies (2004)

2. Statement of Position 83‐1, Reporting by Banks of Investment Securities Gains or Losses

3. Statement of Position 01‐6, Accounting for Certain Entities (Including Entities with Trade Receivables) That Lend to or Finance the Activities of Others

4. Statement of Position 03‐3, Accounting for Certain Loan and Debt Securities Acquired in a Transfer

Acquisition of a Banking or Thrift Institution

The following discussion applies not only to the acquisition of a savings and loan association, but also to acquisition of savings and loan holding companies, commercial banks, mutual savings banks, credit unions, and other depository institutions with assets and liabilities of the same type.

Purchase method

In accounting for the acquisition of a banking and thrift institution, the fair value of the assets and liabilities acquired must be determined using the separate‐valuation method. Under this method, each of the identifiable assets and liabilities acquired are accounted for individually, or by type, at its fair value at the date of acquisition. The total amount is reported in the consolidated financial statements.

Note that use of the net‐spread method is not considered ...