In an effort to better assess the impact on regulatory capital
and the regulators' assessment of earnings of our banking
clients of two new accounting standards, Accounting Standards
Update No. 2016-01 Financial Instruments-Overall, and Accounting
Standards Update No. 2016-02 - Leases (ASU 2016-01 and 2016-02), we
recently spoke with personnel in the Boston and New York Regional
FDIC offices. You may recall from reading previous newsletters that
ASU 2016-01 requires that the change in fair value of equity
securities must be recognized in net income rather than
comprehensive income. Several of our bank clients hold equity
securities in their investment portfolios.
Given this upcoming change in accounting, we were interested to
learn if there is any anticipated regulatory relief. Based on our
discussions, it doesn't appear likely that the regulatory
agencies will grant relief from this provision. While they
indicated that a bank's capital position needs to be able to
absorb such impacts, they also noted that they recognize these
adjustments may cause significant volatility and they will focus on
core earnings when appropriate.
In regard to the new lease standard (ASU 2016-02), we were
curious how these new rights to use assets will be treated for
capital purposes from a risk weighting perspective. It was
indicated that at this point, it looks like they will be assigned
risk weightings based on the underlying leased asset.
The regulators also indicated that they are contemplating the
issuance of a Financial Institution Letter (FIL) in the relatively
near future discussing their current thoughts on the treatment of
these new standards.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Determining the locus of ownership of intangible property related to the development of new products and services is one of the principal challenges that tax managers in multinational enterprises (MNEs) face on an ongoing basis. Tax managers must balance non-tax corporate objectives, tax efficiency, tax risk management, and financial reporting considerations.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).