Magazine article American Banker

Thrifts Seek Delay in Implementing Loan-Origination Accounting Rules

Magazine article American Banker

Thrifts Seek Delay in Implementing Loan-Origination Accounting Rules

Article excerpt

Thrifts Seek Delay in Implementing Loan-Origination Accounting Rules

Representatives of the thrift industry told the Financial Accounting Standards Board Wednesday that the accounting group's proposals for accounting of loan-origination fees would be difficult to implement retroactively. They said they would need at least a year to upgrade their systems to implement the proposals.

But representatives of the accounting profession told the board that they would like financial institutions to have the option of applying the new rules retroactively if it is feasible for a particular institution.

The FASB, the Stamford, Conn.-based group which establishes accounting standards, is holding hearings here on its proposals to change accounting procedures on fees for originating and acquiring loans. The board has proposed that most fees associated with loan originations be deferred over the life of the loan, rather than being recognized immediately as income. Many of the costs would be expensed in the period in which they are incurred, under the proposal.

"It's the single most important issue affecting our industry ever to come before the FASB since [the board's] inception in 1973,' said George L. Engelke Jr., executive vice president and treasurer of Astoria Federal Savings and Loan Association, Long Island City, N.Y. Mr. Engelke testified on behalf of the U.S. League of Savings Institutions.

The rules would apply to most lenders, but thrifts would feel the biggest impact because of their heavy reliance on loan-fee income. While the industry has basically accepted the fact that it will have to defer loan fees, thrifts hope during the three days of hearings ending Friday to convince the board to alter other parts of the proposal.

One issue is the effective date. The standards board has proposed an effective date for the proposals of Dec. …

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