The AICPA recently issued SOP 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others. The SOP applies to all banks, savings institutions, credit unions, finance companies, mortgage companies, and other entities (including entities with trade accounts receivable) that lend to or finance the activities of others. It is effective for financial statements issued for the fiscal year beginning after December 15, 2001, with earlier application encouraged.

One of the primary purposes for the issuance of the SOP is to reconcile the accounting and financial reporting guidance in the audit and accounting guides for banks and savings institutions, credit unions, and finance companies. Some of the more important changes addressed in the SOP include the following:

• Eliminating certain disclosures for credit unions, including, for example, additional information about repurchase agreements, servicing assets, and deposit liabilities.
  
  
• Requiring regulatory capital disclosures for credit unions.
  
  
• Explicitly including corporate credit unions and mortgage companies in its scope. Therefore, those entities would be subject to the accounting and disclosure requirements, including regulatory capital and net worth requirements.
  
  
• Requiring disclosure of financial instruments with off-balance-sheet credit risk for all financial institutions.
  
  
• Requiring additional disclosures for banks and savings institutions regarding nonaccrual loans.

Because not all of the provisions of the SOP are applicable to all entities, the recognition, measurement, presentation, and disclosure requirements in the SOP are organized in the following sections:

• All Entities
  
  
• Financial Institutions
  
  
• Entities with Financing or Mortgage Activities
  
  
• Credit Unions
  
  
• Finance Companies and Entities with Financing Activities (including Entities with Trade Receivables)

A copy of the SOP can be obtained by calling the AICPA at (888) 777-7077 or on the AICPA's website at www.cpa2biz.com.

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