On September 8 NRECA filed a
comment letter with the FASB, responding to their invitation to comment on whether they should incorporate International
Accounting Standards (IAS) 20 Accounting for Government Grants and Disclosure
of Government Assistance into US GAAP. We concur with the
provisions of IAS 20 with the exception of the manner in which a below-market
interest rate loan from a government entity is treated. IAS 20 would have
our members fair value all of their RUS debt and record interest expense going
forward using the effective interest method, which would be burdensome for our
members and of no value to our member’s stakeholders. Such an outcome
would require our members to keep two sets of books – one for financial
reporting and one for RUS compliance.
This, plus the act of fair valuing
RUS debt, would be unduly burdensome. Our members have been accounting for
REA/RUS loans based on US GAAP, which has been in place in one form or another
on this issue since 1936. In all the years since the liability for a
loan of a private company was recorded in accordance with the loan’s historical
carrying value based on its contractual terms and conditions. All RUS
accounting for debt and RUS mortgage loan covenants are based on the way our
members have historically recorded debt and the associated interest
expense. We do concur with the other provisions of IAS 20, however, we
urged the FASB to exclude accounting for below-market interest rate loans since
existing US GAAP is and has been meeting the needs of our members and their
stakeholders for decades.
