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|                                                       | **Page No.** |
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| **ACCOUNTING MANUAL FOR FEDERAL CREDIT UNIONS**       | **1**        |
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| > ***NEW REVISED EDITION***                           | ***1***      |
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| > ***PURPOSE AND USE AS A PRESCRIBED SYSTEM***        | ***1***      |
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| # *LOOSE-LEAF SYSTEM - PERIODIC REVISIONS*            | **2**        |
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| # *ELIMINATI                                          | **2**        |
| ON OF THE RECOMMENDED CREDIT UNION CHART OF ACCOUNTS* |              |
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| **CREDIT UNION OPERATIONS GOVERNED BY LAWS, BYLAWS    | **2**        |
| AND REGULATIONS**                                     |              |
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| **ACCOUNTING PRINCIPLES AND STANDARDS \-- PURPOSE AND | **2**        |
| SCOPE**                                               |              |
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**ACCOUNTING MANUAL FOR FEDERAL CREDIT UNIONS**

***NEW REVISED EDITION***

A recent change in the statute governing credit union financial
reporting has necessitated and hastened this revision to the existing
*Accounting Manual for Federal Credit Unions*.

Section 201(a) of the Credit Union Membership Access Act (CUMAA), Public
Law 105-219, 112 Stat. 918 (1998), added a new subsection to section
202(a)(6) of the Federal Credit Union Act (FCUA), 12 U.S.C.
1782(a)(6)(C). Subsection (C) addresses accounting principles, generally
requiring credit unions having assets of \$10 million or more to follow
generally accepted accounting principles (GAAP) in all reports or
statements filed with the NCUA Board.\\1\\ 12 U.S.C. 1782(a)(6)(C). The
NCUA Board, and State credit union supervisors under applicable
statutes, are given the authority to require credit unions having less
than \$10 million in assets to follow GAAP. 12 U.S.C.
1782(a)(6)(C)(iii).

In the Federal Register: July 29, 1999 (Volume 64, Number 145), the NCUA
Board published a final rule revising §741.6 implementing the statutory
mandate that Call Reports filed by credit unions having assets of \$10
million or more must be consistent with GAAP. 12 U.S.C.
1782(a)(6)(C)(i).

As a result of the statutory change and the implementing rule, **credit
unions under \$10 million in assets are provided this Manual as a guide
in accounting for financial transactions and reporting in accordance
with the regulatory-basis of accounting prescribed herein.** Of course
these credit unions also have the option of following generally accepted
accounting principles (GAAP).

Credit unions with \$10 million or more in assets should seek the advice
of an independent accountant to gain a full understanding of GAAP.

***PURPOSE AND USE AS A PRESCRIBED SYSTEM***

This manual sets forth comprehensive procedures for the maintenance of
accounting records by federal credit unions with under \$10 million in
assets. It also contains accounting guidelines and requirements for
accounting topics of interest such as investments in credit union
service organizations, interest method of amortization, securities,
repossessed property, share drafts, credit cards, etc.

This Manual is not incorporated by reference in the NCUA Rules &
Regulations (R&Rs). However, adherence to the accounting principles and
standards in Section 200 of this Manual will ensure compliance with the
full and fair disclosure requirements of the R&Rs which:

-   Define the required level of disclosure needed on financial
    statements;

-   Require federal credit unions to select an accounting basis that is
    described in this Manual; and

-   Instructs credit unions to prepare financial statements in the
    manner prescribed in this Manual or its equivalent financial
    statements.

The remainder of the Manual is intended to provide guidelines to credit
union officials and employees with information on recommended procedures
and practices.

For the most part, the manual adheres to generally accepted accounting
principles (GAAP) except for certain permissible accounting practices
which are less stringent GAAP.

The manual may be adopted by federally insured, state chartered credit
unions under \$10 million in assets at the option of the credit unions
and their state supervisor.

***LOOSE-LEAF SYSTEM - PERIODIC REVISIONS***

The manual is designed as a loose-leaf system to facilitate updating.
When revisions become necessary, revised pages will be issued,
accompanied by appropriate explanations and instructions for updating
your manual.

***ELIMINATION OF THE RECOMMENDED CREDIT UNION CHART OF ACCOUNTS***

Credit unions are required to file periodic (quarterly or semi-annual)
call reports with the National Credit Union Administration (NCUA). The
credit union's accounting system and its supporting chart of accounts
must facilitate reporting on the call report. Consequently, it is NCUA's
contention that the call report reporting format and requirements should
drive the credit union's financial reporting mechanism rather than the
*Accounting Manual* chart of accounts, though familiar to credit unions.
Trying to keep the two NCUA systems uniform, compatible and current was
administratively unworkable. Accordingly, the recommended and familiar
*Accounting Manual* chart of accounts is being eliminated in favor of a
charting system of the credit union's own design which best facilitates
its compliance with the current and existing call reporting
requirements.

**CREDIT UNION OPERATIONS GOVERNED BY LAWS, BYLAWS AND REGULATIONS**

Federal credit unions are corporations organized and operated under the
provisions of the Federal Credit Union Act (Act). They are corporations
with powers limited to those granted by their charter and the Act. They
are governed by their bylaws and the regulations issued by the National
Credit Union Administration (NCUA). All directors, officers, and
committee members should have a general knowledge of these laws, bylaws,
and regulations, and a specific knowledge of the duties required of the
particular office held.

**ACCOUNTING PRINCIPLES AND STANDARDS \-- PURPOSE AND SCOPE**

Accounting by federal credit unions serves many internal and external
purposes. Comprehensive and accurate financial information is essential
so that credit union management can make sound decisions concerning the
operation of the credit union. Management must also account for its
actions to members, creditors, the National Credit Union Administration
in its supervisory capacity, and others having valid financial
interests.

Financial information provided to management is summarized in credit
union financial statements which are intended to present fairly the
financial position of the credit union at a given date, and the results
of its operations for a given accounting period. The financial
information so presented must be supported by accounting records
maintained in conformance with principles and standards designed to
provide full and fair disclosure of all material information relating to
the credit union\'s operations.

The principles and standards of federal credit unions have been designed
to follow practices in use by other financial and lending institutions
and are generally based on generally accepted accounting principles
(GAAP) as developed by the accounting profession. Use of these
principles by credit unions for their accounting and financial reporting
will provide for full and fair disclosure of financial information.

Many of the principles and standards require the exercise of judgment by
credit union officials where optional courses of action are available or
where estimates are required for application of a particular principle.
Also, direction is necessary under the doctrine of materiality (See
Section 200) in order to evaluate the need for applying a particular
principle to specific transactions or situations. Subject to these
qualifications, the principles and standards in this section of the
Manual must be followed to comply with the full and fair disclosure
requirements of the Rules and Regulations.