Arkansas
State Bank Department
General Ledger,
Cash Receipts & Disbursements Journal, and Financial Statements
(updated
Recommendation is made for the maintenance of a general ledger, general
journal, cash receipts and disbursements journal, and checkbook for the holding
company. If financial records are
maintained by the organization’s accountant for the purpose of preparing
Federal Reserve System reports, documentation for financial statements must be
made available to examiners during a scheduled examination. Knowledge of entries made to the
corporation’s financial statements is the responsibility of parent company’s
management (Board of Directors and executive officers).
If a general ledger’s chart of accounts is established to correspond
with the format of FR Y-9 reports, this will expedite the preparation of the
Federal Reserve System reports. Complete
documentation of all entries to the general ledger or subsidiary ledgers is
essential for the establishment of audit trails and determination of an
account’s validity. Posting of entries
as transactions occur is recommended in order to avoid omissions at the time of
regulatory report preparation.
The financial statements of the bank holding company must accurately
reflect the financial condition and operating results. Segregation of the following accounts for
each bank subsidiary in a multi-bank organization is recommended:
Investment in equity capital
Goodwill (appropriately documented with
impairment testing)
Amortization of goodwill, when appropriate,
based upon impairment testing
Dividend income
Interest income
Credit life income
Management fee income
Equity in undistributed earnings
The production of informative financial statements provides an
effective decision making tool for directors and shareholders.
Management is reminded that nontraditional expenses incurred by the
holding company must be thoroughly documented as to their eventual benefit to
the bank subsidiary. Nontraditional expenses
include, but are not limited to, home burglar/surveillance equipment, car
phones, excessive travel and entertainment (football games); country club and
health club memberships, cable TV service, and commission expenses for
paintings. Consideration for payment of
such expenses must be given to the ultimate impact on the bank subsidiary. Will the holding company’s payment of certain
expenses result in higher dividends being required from a bank subsidiary? How will the payment of higher dividends effect
the bank’s capital augmentation? In the
event that a bank subsidiary’s financial condition deteriorates to the point
that dividend payments are prohibited, what are the parent company’s secondary
sources of funds?
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