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amounts were included in income and deducted by FNPC for Federal
income tax purposes on a current basis. Because respondent's
adjustments were based on the balances in the FNPC ledger
accounts, those adjustments took into account any amortization or
yield adjustment that was reflected in such accounts.
UFB Costs at Issue
UFB adopted SFAS 91 effective for 1988 on a retroactive
basis for its outstanding residential mortgage loans and on a
prospective basis for its other loans. Prior to its application
of SFAS 91, UFB, in accordance with its established accounting
practices, treated the costs described in SFAS 91 as current
expenses for financial accounting and reporting purposes. In
1988, UFB began to defer fees and costs described in SFAS 91 for
financial accounting and reporting purposes. For each of the
years in issue and, to the best knowledge of management, for all
prior years, UFB currently deducted the costs described in SFAS
91 for Federal income tax purposes. To apply SFAS 91, UFB
established ledger accounts to record fees and costs subject to
deferral with respect to several categories of loans in
accordance with SFAS 91. Unlike the ending balances in the FNPC
ledger accounts, which reflected only net numbers, the UFB ledger
accounts recorded fees and costs separately. In addition, the
amortization or adjustments to yield of amounts deferred under
SFAS 91 by UFB were recorded in separate general ledger accounts.
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