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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Conforming Practice by all Financial Institutions

SOP 01‐6, Accounting for Certain Entities (Including Entities with Trade Receivables) That Lend to or Finance the Activities of Others, reconciled and conformed the accounting and financial reporting provisions of the former AICPA AAG applicable to banks and saving institutions, credit unions, and finance companies. It furthermore added mortgage companies and corporate credit unions to the scope of coverage. The standard applies, additionally, to all entities which finance other entities, even via normal trade credit arrangements, and thus directs the accounting to be employed by manufacturers, retailers, wholesalers, and other business enterprises. The provisions of SOP 01‐6 have been incorporated into the current AAG, Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies and Mortgage Companies.

SOP 01‐6 provides revised accounting guidance for sales of loan servicing rights, in order to comply with the revenue recognition model set forth in EITF Issue 95‐5, Determination of What Risks and Rewards, if Any, Can Be Retained and Whether Any Unresolved Contingencies May Exist in a Sale of Mortgage Loan Servicing Rights. It also adopts the basis allocation approach set forth in FAS 140. It made it clear that all entities which lend to or finance the activities of others are subject to the accounting guidance found in the Guide, Audits of Finance Companies, including insurance companies ...

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