WOCCU Observes Key IASB Meeting
England— World Council of Credit Unions,
(WOCCU) advocated the importance of
recognizing the uniqueness of credit union
mergers and participated as an invited observer
at the International Accounting Standard Board
(IASB) meeting. During the meeting the IASB
debated how cooperatives and mutuals should
account for their mergers.
For the past three years WOCCU has worked with
international credit union movements and
accounting standards boards in the United States,
Canada and the IASB to ensure that the unique
nature of credit union mergers is understood.
WOCCU has taken on the lead role with the IASB in
securing the current exemption from credit unions
from utilizing the purchased method of
International Financial Reporting Standard
3 on Business Combinations will be published by
the end of March 2004, requiring the application
of a new method (purchased accounting) as opposed
to the traditional (pooling of interest) method
used by credit unions. However, as a result of
WOCCU's work with the IASB, cooperatives and
mutuals will be excluded from the scope of IFRS 3
until an amendment is developed that
appropriately recognizes the uniqueness of
mergers of mutuals/cooperatives. The IASB plans
to publish an Exposure Draft of its mutuals
amendment to IFRS also at the end of March 2004
for a 90-comment period. This amendment will
likely propose that the aggregate fair value of
the acquiree's identifiable assets, liabilities
and contingent liabilities be recognized as the
deemed cost of the business combination.
"Leveraged buyouts and hostile take over bids
just don't happen in credit union mergers and we
should not be forced to utilize the accounting
for credit union mergers that don't fit," noted
Dave Grace, WOCCU senior manger, trade
association following the IASB meeting. Grace
continued, "The fundamental issue is that we need
to ensure that when two credit unions merge, the
capital of the credit union being absorbed can be
added into the continuing credit union. Unless
credit unions get the special treatment that
WOCCU is advocating for the capital may not
directly transfer over and it may stop a lot of
mergers that otherwise would make sense."
The IASB meeting on this topic was a debate as
what the amendment for mutuals/cooperatives to
IFRS 3 might contain. The tentative decision was
that if the acquirer and acquiree are both mutual
entities and no payment is exchanged to complete
the merger, the credit unions will be able to
different standard to their benefit.
"WOCCU will continue to work with members and
IASB to ensure that if credit unions choose to
merge, they can do so under accounting rules that
recognize the unique nature of mergers among
cooperative entities," noted Arthur Arnold,
president and CEO.
World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.
World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 57,000 credit unions in 105 countries serve 217 million people. Learn more about World Council's impact around the world at www.woccu.org.
Phone: (608) 395-2000