Opinion ID: 212039
Heading Depth: 3
Heading Rank: 2

Heading: Application of GAAP Accounting Principles

Text: 26 The government contends that the Court of Federal Claims erred in finding that GAAP did not control the computation of supervisory goodwill in the Century and Ohio transactions. The Assistance Agreements for these transactions contained clauses stating that any computations made for purposes of the Agreement would be governed by GAAP. The Assistance Agreements did not otherwise address the period over which goodwill would be amortized. Thus, the government reasons, there was no promise to permit extended amortization of supervisory goodwill over forty years. The government therefore concludes that, under our precedent, it is not bound to the extended amortization schedule. See Anderson v. United States, 344 F.3d 1343 (Fed.Cir.2003); D & N Bank v. United States, 331 F.3d 1374 (Fed.Cir.2003). The government further asserts that its application of the initial baseline regulatory policy of forty years did not change the contractual term requiring GAAP or suggest a commitment to protect Home from changes in regulatory policy. (The FASB later changed the GAAP supervisory goodwill amortization period from forty years to between eight and twelve years.) Moreover, the government argues, the Century and Ohio Resolutions, like the Assistance Agreements, required Home to adhere to GAAP. 27 The plaintiffs argue that the government promised that the Century and Ohio supervisory goodwill would amortize over forty years. The plaintiffs rely on the Assistance Agreements' lack of an indication that goodwill specifically (as opposed to accounting generally) would be governed by GAAP, coupled with the Resolutions' statement that goodwill and its amortization period are required to conform with regulatory requirements, to support their entitlement to a forty-year amortization period, which was FHLBB's applicable regulatory policy when the contract was formed. Moreover, the plaintiffs point out, the government's Supervisory Agent did not object when Home filed regulatory documents describing how it treated supervisory goodwill stemming from the Century and Ohio transactions. 28 We affirm the conclusion of the Court of Federal Claims that the contracts provided for a forty-year amortization period for supervisory goodwill. The Century and Ohio Resolutions did not specify an amortization period, but they did set out the process by which the amortization period would be determined. Home III, 57 Fed.Cl. at 704 (Home Savings was to provide regulators with an analysis, supported by independent auditors, [that] included the proposed amortization period for supervisory goodwill arising from those transactions.). The Court of Federal Claims found that Ahmanson had provided circumstantial evidence that such an analysis was furnished at the time and that the schedule adopted by the bank and regulators called for 40 year amortization. Id. This circumstantial evidence of an agreement to amortize supervisory goodwill over forty years included frequent thrift financial reports to regulators and routine regulatory audits, and in none of those instances did the regulators object to Home's use of a forty-year amortization schedule. Id. at 704-05. As the Court of Federal Claims found, it is unreasonable to believe that regulators would have allowed Home Savings to amortize supervisory goodwill over a 40 year period absent an understanding that this was the implementation of the process agreed upon in the Century and Ohio Assistance Agreements. Id. at 705. 29 These factual findings are not clearly erroneous, and we agree with the inference that the Court of Federal Claims drew from them in the trial on damages: that the parties had agreed to an amortization period other than the one provided by GAAP for the supervisory goodwill amortization period for all of Home's acquisitions at issue in this case, including the Century and Ohio transactions. See id. at 703-05. The Court of Federal Claims correctly concluded that the contracts provided for a forty-year amortization period for supervisory goodwill. 6