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AFMD-89-63 1 (1989-04-28)

handle is hein.gao/gaobabpkq0001 and id is 1 raw text is: Financial Statements Notes to Financial Statements DECEMBER 31, 1988 AND 1987 1. Summary of Significant Accounting Policies: General. These statements do not include accountability for assets and liabilities of closed insured banks for which the Corporation acts as receiver or liquidating agent. Periodic and final accountability reports of the Corporation's activities as receiver or liquidating agent are furnished to courts, supervisory authorities, and others as required. U.S. Treasury Obligations. Securities are shown at amortized cost which is the purchase price of securities less the amortized premium or plus the accreted discount. Such amortizations and accretions are computed on a daily basis from the date of acquisition to the date of maturity. Interest is also calculated on a daily basis and recorded monthly using the constant-yield method. Allowance sQr Lg55. The Corporation records as a receivab;e the funds advanced for assisting and closing banks and establishes an estimated allowance for loss. The allowance for loss represents the difference between the funds advanced and the expected repayment, based on the estimated cash recoveries from the assets of the assisted or failed bank, net of all liquidation costs. The Corporation has recorded the estimated losses related to all banks that have been closed, or that have entered into financial assistance agreements, or that the Corporation has identified as probable to fail or in need of assistance as of year end. The Corporation establishes an estimate for potential loss regarding litigation against the Corporation in its Corporate capacity. The Corporation's Legal Division recommends these estimated losses on a case by case basis. Depreciation. The cost of furniture, fixtures, and equipment is expensed at time of acquisition. This policy is a departure from generally accepted accounting principles, however, the financial impact is not material to the Corporation's financial statements. The Washington Office Buildings are depreciated on a straight-line basis over a 50-year estimated life. The San Francisco Condominium Offices are depreciated on a straight-line basis over a 35-year estimated life. Merger Assistance Losses and Expens_. The Corporation records the costs incurred for 13-C assistance and/or merger assistance with banks as a merger assistance loss. These costs, which are not liquidation related, are specified in the terms of the agreements and have no potential for recovery by the Corporation. Nonrecovtrable Insurance Expenses. Nonrecoverable insurance expenses are incurred by the Corporation as a result of (1) paying insured depositors in closed bank payoff activity; (2) administering and liquidating assets purchased in a corporate capacity; (3) bid-package preparation for assistance transactions. and (4) bridge bank operations. &tatfments of Cash Fl w. In November 1987, the Financial Accounting Standards Board issued Statement No.95, Statement of Cash Flows (SFAS 95). The Corporation has elected to adopt the provisions of SFAS 95 by presenting the Statements of Cash Flow in place of the Statements of Changes in Financial Position. For purposes of implementing SFAS 95, the Corporation has defined cash equivalents as short-term highly liquid investments with original maturities of three months or less. This includes the daily purchase of one day Special Treasury Certificates. The Corporation has also elected to restate 1987 results for comparative purposes. RtcIassifjLatIons. Reclassifications have been made in the 1987 Financial Statements to conform to the presentation used in 198B. GAO/AFMD-9.63 Federal Deposit nsurance Corporation Page 16

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