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AcSEC Practice Bulletin 1, Purpose and Scope of AcSEC Practice Bulletins and Procedures for Their Issuance AICPA Audit and Accounting Guide, Banks and Savings Institutions ISSUE



In the normal course of business a bank accepts customer deposits that include checks and similar items drawn on other banks or institutions. The receiving bank passes those checks on to the institution on which they are drawn and receives cash (or credit for cash) in return (referred to as the "collection process"). The term deposit float refers to the amount of deposited items that the bank has accepted but has not yet collected. The universally followed practice until the end of 1983 had been for the receiving bank to reflect the deposited checks as liabilities to customers and as cash. In most cases, the bank pays interest from the date of deposit. Two financial institutions netted at least some portion of those amounts in their December 31, 1983 financial statements. One financial institution justified its accounting by asserting that it is merely an agent for the customer until the checks are collected and therefore has no liability or asset. The issues are (1) whether banks should be permitted to change their accounting to recognize assets and liabilities relating to customer deposits of checks only after funds have been collected from the drawee bank and (2) whether a change in the method of accounting for customer deposits would constitute an "accounting change " under Opinion 20. Copyright © 1984, Financial Accounting Standards Board Not for redistributio

Topics: The representatives of the FASB, Federal Deposit Insurance Corporation, Federal Reserve Board
Year: 1984
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