Former FASB Director MacDonald Opines on $18 million Intercompany Payable/Receivable at March 31, 2008

Excerpts from “Rebuttal Report of Linda MacDonald”:

“III. Opinion

10. Based on my review of the materials listed in Exhibit A and my knowledge, training, and professional experience, it is my opinion that the $18 million capital contribution was not “backdated” to March 31, 2008 in the Bank’s Q12008 regulatory filings, as Professor Saunders asserts. Rather, the $18 million capital contribution was appropriately recorded as an intercompany payable/receivable at March 31, 2008 under GAAP, which forms the basis for the Bank’s reporting in the regulatory filings. Accordingly, there was no act of “backdating” to be disclosed in Bancorp’s Q12008 SEC filings.”

“16. Relying on the SEC Complaint in this matter, Professor Saunders asserts that the capital ratio disclosed in Bancorp’s Q12008 SEC filings (10.26%) was false and misleading because the $18 million capital contribution was “backdated” to March 31, 2008 in the Bank’s Q12008 regulatory filings.3

Footnote 3: Professor Saunders states, “For the purposes of preparing this report and developing the opinions expressed herein, I assume the facts as alleged in the SEC’s complaint in this case are true.” (Saunders Report Paragraph 8).”

“17. Recognition is a key concept underlying GAAP and its application. FASB Concepts Statement No. 5, “Recognition and Measurement in Financial Statements of Business Enterprises (“CON 5”) explains, “Recognition is the process of formally recording or incorporating an item” in GAAP financial statements (for example, as a liability or asset). (¶6) Yet the issue of recognition in GAAP is not addressed or otherwise referred to by Professor Saunders (or the SEC).”

“18. As a basis for addressing issues like this one under GAAP the primary focus must be on recognition. That is the essential starting point. The related issues that then follow are measurement and classification. Measurement refers to the amount at which an item is recognized in GAAP financial statements. Classification refers to where in GAAP financial statements the item is shown (for example, within assets, liabilities, or equity). I address those issues below.”

“VI. The Alleged Failure To Disclose

42. Professor Saunders asserts that the alleged “backdating” in the Bank’s Q12008 regulatory filings should have been disclosed in Bancorp’s Q12008 regulatory SEC filings. (Saunders Report p. 6(c)). I disagree. The $18 million capital contribution was not “backdated” to March 31, 2008 in the Bank’s Q12008 regulatory filings. Accordingly, there was no act of “backdating” to disclose in Bancorp’s Q12008 SEC filings.”

To access Ms. MacDonald’s full report click here.

Posted on April 23, 2012, in Postings. Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: