MADISON, Wis. (4/17/08)--Certain provisions in the International Accounting Standards Board’s (IASB) proposed accounting standards for small- and medium-sized enterprises (SMEs) could be detrimental to credit unions, according to the World Council of Credit Unions (WOCCU). WOCCU made its position known to IASB officials last week in a letter written by Dave Grace, vice president of WOCCU Association Services. WOCCU’s concerns focus on the draft’s failure to clearly identify to whom the standards apply and its failure to significantly simplify reporting requirements for smaller institutions, according to Grace. “Excluding credit unions from the scope of the SME standards and requiring adherence to the full International Financial Reporting Standards is both impractical and counter to the IASB's intention of making accounting requirements more accessible to smaller non-listed institutions,” Grace wrote in his letter to IASB board member Thomas E. Jones. Specific areas of concern include the draft's failure to clarify whether, as member-owned financial cooperatives, credit unions fall within the document's provisions. The draft articulates application to entities that hold public assets “for a broad group of outsiders such as a bank, insurance entity, securities broker/dealer, pension fund, mutual fund or investment banking entity.” Failure to include credit unions in the list may imply inclusion in full International Financial Reporting Standards, which could create insurmountable hurdles for many SMEs, Grace wrote. A second area of concern is IASB's required use of “fair-value accounting” methods and its usage in credit union mergers. The intent of a credit union merger is not an attempt “to bid up or receive any price beyond book value of its outstanding ownership shares,” Grace told IASB. The way mergers are accounted for on the newly combined entity's financial statement could be misleading and negatively impact the credit union's capital-to-asset ratios in some jurisdictions, Grace wrote. “We strongly recommend that the pooling-of-interest method, which does not require a fair valuation of both entities pre-combination, be allowed for SMEs or, at a minimum, for cooperatives and micro-entities with fewer than 10 employees,” Grace wrote. The average credit union worldwide to which these regulations would apply has 2,650 members, $19 million in assets and 7.5 employees. WOCCU also recommended a longer transition period for implementing the standards, given the often sluggish flow of information to small credit unions in some developing countries.