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Financial institutions should make sure to accurately record any refund they receive from their prepayment to the Deposit Insurance Fund (DIF).

Deposit Insurance Fund Refund: Accounting for FDIC Insured Financial Institutions

  • 6/20/2013

Deposit Insurance Fund Refund: Accounting for FDIC Insured Financial Institutions

The Deposit Insurance Fund (DIF) assessment prepayment made by Federal Deposit Insurance Corporation (FDIC) insured financial institutions in 2009 will soon be refunded, if a portion of their payment was unused. The FDIC recently announced that it will send financial institutions a notification of their refund by June 28, 2013, through the FDIC assessment invoice of the same date.

“This invoice should be reviewed carefully, as the accounting for the DIF refund should be different than the ongoing DIF assessment,” says Craig Wierson, a financial institutions partner with CliftonLarsonAllen.

The refund should be recorded in the accounts for the following entries as shown below:

  • Debit: Cash for the refund amount (net of the assessment for the quarter)
    • Credit: Prepaid FDIC assessment for the refund amount

If the refund is not received before June 30, 2013, the prepaid assessment can continue to be reported in the quarterly regulatory report, as it has in the past.

Potential income tax issues

In 2009, the FDIC gave insured financial institutions specific directions on how to record the DIF assessment prepayment, and then in subsequent quarters, how to record the quarterly actual risk-based assessment as an expense through amortization of the prepaid assessment account. The book accounting for the prepayment was the same for income tax purposes whether the insured financial institution was an accrual or cash basis taxpayer.

“If the prepayment was recorded accurately, then the changes to an insured financial institution’s accounts and taxes are straightforward. If the prepayment was not recorded properly when the assessment began, or during the quarterly assessments, insured financial institutions may encounter issues that could affect their accounts and taxes,” notes Wierson.

How we can help

Contact your tax professional for an assessment refund analysis, or with any questions about how the refund may affect your business.

Craig Wierson, Financial Institutions Partner or 515-222-4400