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IBAA OPPOSES FASB TREATMENT OF TROUBLED LOANS

 IBAA OPPOSES FASB TREATMENT OF TROUBLED LOANS
 WASHINGTON, Nov. 9 /PRNewswire/ -- The Independent Bankers


Association of America (IBAA) today opposed the Financial Accounting Standards Board's Exposure Draft, "Accounting by Creditors for Impairment of a Loan" as burdensome and costly.
 Owen O. Freeman Jr., chairman of the board of directors of two community banks -- the Commonwealth State Bank in Newtown, Pa., and First Capital Bank of York, Pa., -- testified before the FASB on behalf of IBAA member banks. Freeman serves on the IBAA Bank Operations Committee and chairs the Bank Operations Subcommittee on Lending Issues.
 FASB's proposal would require that impaired loans be measured at the present value of expected future cash flows by discounting those cash flows at the loan's effective interest rate.
 The IBAA believes that the proposed accounting treatment would result in serious conflicts between regulatory policy and accounting standards. Calculating present values requires subjective judgments in determining assumptions about the amount of each cash payment, the timing of each payment and the rate at which they will be discounted.
 "We expect to see disagreements as bankers, regulators, accountants and the IRS look at loan valuations and adjustments to the allowance for loan losses caused by valuations and revaluations," Freeman testified. The IBAA believes banks will incur increased costs as they prepare and document loan valuations and resolve differences between regulators and accountants.
 "We urge the board to recognize our highly regulated environment and work with the banking agencies before adopting any final statement. Without agreement from the banking industry's primary federal regulators -- FDIC, Federal Reserve Board and the Office of the Comptroller of the Currency -- the board could create another burden by setting an accounting standard that the agencies do not accept as appropriate."
 Freeman strongly urged that, if it proceeds with the statement, the FASB should modify the proposed statement to make it more feasible and practicable for community banks to comply.
 IBAA is the only national trade association which exclusively represents the interests of the nation's community banks.
 /delval/
 -0- 11/9/92
 /CONTACT: Ann Grochala or Diane Casey of the Independent Bankers Association of America, 202-659-8111/ CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU:


DC -- DC005 -- 8601 11/09/92 10:28 EST
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Publication:PR Newswire
Date:Nov 9, 1992
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