Credit Union Alert FASB Update Now in Effect

What the new rules mean for credit unions and equity securities

Introduction

Utilizing equity securities, like stocks, mutual funds, and exchange-traded funds, has historically been a reasonable way to invest credit union assets. But now, due to updated accounting guidelines, these types of investments may not be as appropriate as they once were.

The financial accounting standards board (fasb) has issued a new guidance that impacts all entities holding financial assets, including credit unions, by changing the standards of an equity security. The guidance forces credit unions to report any losses on stocks, mutual funds, and etfs on their current net income statements, even if those investments are designed to be held for the long-term to meet future obligations like funding executive retirement plans. The guidance came into effect december 15, 2018, and the volatility of equity securities can cause a number of issues for credit unions if they don’t transition their portfolios to more stable and predictable assets soon.

Let’s take a look at what is happening under the fasb’s new guidance, why this change came to pass, and what credit unions can do to ensure that they make the right choices when it comes to equity securities.