Credit unions must perform accounting due diligence for the employee benefits they offer. They should account on their financial and regulatory reports for the benefit obligations and the benefit funding in accordance with generally accepted accounting principles (GAAP).1 The FCU Act requires credit unions that have $10 million or more in assets to file their regulatory reports in accordance with GAAP.2 GAAP is promulgated by FASB and set forth in the ASCs, which are accessible at www.fasb.org.
Credit unions may need to seek the advice of an independent licensed accountant (practitioner) to understand the correct application of GAAP to their individual employee benefit obligation or funding vehicle, so they can file their financial and regulatory reports in accordance with GAAP.
Credit unions often purchase assets to fund their executive compensation and retention program liabilities. In particular, credit unions can purchase life insurance in connection with many of these agreements. Credit unions must account in their financial and regulatory reports for the insurance or other assets purchased to fund employee benefits in accordance with applicable GAAP. In many cases, because there is no right of offset, these investments and other assets should be reported as assets separately from any related benefit liability.
For example, if a credit union purchases a mutual fund to fund a deferred compensation obligation with a select employee, it would follow GAAP in accounting for the mutual fund. If it purchases a split-dollar insurance policy, it would follow applicable GAAP depending on whether the policy is a collateral-type (loan regime) or an endorsement-type (economic benefit regime) agreement.
While this section of the Examiner's Guide describes some general reporting principles, exam staff should expect credit unions to perform accounting due diligence and document their accounting policy reporting decisions for review. Exam staff should contact their supervisor if they have questions.
Last updated September 25, 2017
