Pub. 6 2015 Issue 1

spring 2015 13 West Virginia Banker Wesley Allen is a Director in DHG’s Financial Services Group in Charlotte. He has more than 12 years of public accounting experience, working with financial institutions in the areas of process and control evaluation, external financial reporting to reg- ulatory agencies and investors, and compliancewith laws and regulations. Wesley can be reached at wesley. allen@dhgllp.com. process of foreclosure, according to local requirements of the applicable jurisdiction. This standard applies only to consumer loans collateralized by residential real estate and does not include loans collater- alized by commercial or other nonresiden- tial properties. In practice, most entities historically have not recognized the non-financial asset until legal title has passed. However, the additional disclosure requirements are the most significant change, since the financial reporting or accounting department will need to work with credit administration to accurately accumulate foreclosures in process across all the jurisdictions in which the entity operates and report that information in the financial statements. The task force observed that this disclosure requirement provides more complete infor- mation in a creditor’s financial statements regarding the progression of collateral-de- pendent residential consumer mortgage loans from performing to nonperforming status and, ultimately, to foreclosure. Currently, bank regulatory reporting instructions require banks to report in their quarterly regulatory reports the total unpaid principal balance of loans secured by one-to-four family residential properties included in certain categories (revolving, open-end loans secured by one-to-four family real estate, closed-end one-to-four family first liens, and closed-end one-to- four family junior liens) in which formal foreclosure proceedings have started and are ongoing as of period-end, regardless of the date the foreclosure procedure was ini- tiated according to the local requirements. Further, if a loan is already in process of foreclosure and the borrower files a bank- ruptcy petition, the loan should continue to be reported as “in process of foreclo- sure” until the bankruptcy is resolved. The amendments described in the update will be effective for public business for annual periods, and interim periods within those annual periods, beginning after De- cember 15, 2014. Non-public entities also apply the guidance in reporting periods beginning after December 15, 2014, and to interim periods within those annual periods beginning after December 15, 2015. Companies are allowed to use either a modified retrospective transition method resulting in cumulative effect reclassifica- tion adjustments, or a prospective transi- tion method when adopting this update. Early adoption is permitted. Next Steps Most institutions have a policy in place for accumulating loans in process of foreclo- sure for regulatory reporting purposes. However, the inclusion of this information in audited financial statements should cause additional consideration of how the information is accumulated and whether the supporting information is appropriate- ly documented and auditable. n Reach your target audience a ordably. advertise get results KRIS MONTIONE Advertising Sales 727.475.9827 or 855.747.4003 kris@thenewslinkgroup.com