In an opinion piece, Alberto L. Martín Rivera argues that member contributions to Puerto Rico’s cooperative savings and credit unions have been presented as capital under the regulatory accounting basis known as RAP, while U.S. generally accepted accounting principles (GAAP) require member shares to be presented as liabilities. He says the difference changes the balance sheet, how compensation on contributions is recognized, how net economy is determined and how the institution’s financial structure is read.
He writes that capital’s function is to absorb losses and sustain the institution, so a contribution recognized as an obligation to the member cannot be treated like permanent reserves. Martín Rivera distinguishes between what accounting standards require and what Puerto Rico’s fiscal and regulatory framework provides. COSSEC Informative Letter No. 2023-11, issued June 2, 2023, addresses the special regulatory treatment of certain Puerto Rico government bonds, not a timetable for reclassifying member shares.
COSSEC’s 2023 Fiscal Plan refers to a broader transition from RAP to GAAP, mentioning member shares, bond treatment and proposed legislation, but he says the documents do not clearly set a calendar for reclassifying shares, and the transition is not complete in all cooperatives. On GAAP, he cites FASB’s Accounting Standards Codification paragraph ASC 942-405-25-4, which requires credit unions to present all member deposit accounts, including shares, as liabilities.
ASC 942-405-45-4 requires interest paid or accrued on those accounts, commonly called dividends, to be recognized as an expense in the income statement.