Common Reporting Errors
The Federal Reserve provides bank holding companies with forms for annual, quarterly or semi-annual reports (determined by asset size and number of subsidiaries). One copy of each report sent to the Federal Reserve must also be sent to the Arkansas State Bank Department pursuant to Administrative Order #002.
The following reporting errors are most commonly noted:
- Balance Sheet: Failure to reconcile the parent company’s ‘investment in the equity of bank subsidiary’ to the bank’s Call Report ‘equity capital’ for the corresponding reporting period. A reconcilement worksheet usually accompanies the FR Y-9 report form. Refer to http://www.federalreserve.gov/boarddocs/reportforms/categoryindex.cfm?WhichCategory=1
- Income Statement: Failure to report ‘dividend income’ from subsidiaries and/or incorrect reporting of ‘equity in undistributed earnings of the bank subsidiary.' “Undistributed earnings” is the difference between the bank’s net income and bank’s dividends paid.
- Failure to properly accrue for dividends receivable/payable; interest receivable/payable; and income taxes receivable/payable. Management is reminded that dividends are to be booked “payable” and deducted from retained earnings as soon as the Board declares dividends, regardless of payment date.
- Trust preferred securities (“TruPS”). Refer to instructions for appropriate FR Y-9 report form to determine correct reporting lines. As of March 31, 2004 reporting date, Financial Accounting Standard 150 (FAS 150) and Financial Accounting Standards Board Interpretation No. 46 (FIN 46) change reporting instructions for trust preferred securities. The following website contains the current proposal for revising FR Y-9 reporting of trust preferred securities. http://www.federalreserve.gov/boarddocs/reportforms/formsreview/FRY9.20031215.ifr.pdf
It is recommended that a “Changes in Stockholders’ Equity” worksheet be maintained for the purpose of properly reconciling changes which occur to each of the parent company’s capital accounts. Changes that affect the bank subsidiary’s capital accounts (which are not reflected in the bank’s income statement) are to be reflected on the books of the parent company in an appropriate capital account. Other changes in the bank subsidiary’s capital accounts which will not be reflected on an income statement include accounting adjustments for prior years and net unrealized gain (loss) on available-for-sale securities.
Instructions for various Federal Reserve Reporting Forms can be found at: http://www.federalreserve.gov/apps/reportforms