Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.  20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 04-4
February 11, 2004

TO THE OFFICER IN CHARGE OF SUPERVISION AND APPROPRIATE SUPERVISORY AND EXAMINATION STAFF AT EACH FEDERAL RESERVE BANK AND TO DOMESTIC AND FOREIGN BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL RESERVE
SUBJECT:  Accounting for Deferred Compensation Agreements

The Federal Reserve, along with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (the agencies), have issued the attached Interagency Advisory on Accounting for Deferred Compensation Agreements and Bank-Owned Life Insurance (BOLI). Consistent with generally accepted accounting principles (GAAP), the advisory highlights the appropriate accounting for obligations under a type of deferred compensation agreement commonly referred to as a revenue neutral plan or an indexed retirement plan. The benefits payable under these plans are often based on the performance of investments in BOLI.

State member banks should review their accounting for these agreements to ensure that they are being properly reported in accordance with this advisory. Banks should reflect any necessary changes for these agreements in their March 31, 2004, Call Reports as described in the guidance. Banks are not required to file amended Call Reports unless specifically directed by their Reserve Bank. While the interagency advisory applies to banks, it should also be followed by bank holding companies and U.S. branches and agencies of foreign banking organizations that file GAAP-based regulatory reports.

Reserve Banks are asked to distribute this SR letter and the attached interagency advisory to state member banks, bank holding companies, and foreign banking organizations supervised by the Federal Reserve as well as to supervisory and examination staff. Questions pertaining to this letter should be directed to Arthur Lindo, Project Manager (202) 452-2695, Douglas Carpenter, Supervisory Financial Analyst (202) 452-2205, or Salome Tinker, Senior Financial Analyst (202) 452-3034, in the Accounting Policy & Disclosure and Regulatory Reports sections.

Richard Spillenkothen
Director


Attachment:
Interagency Advisory on Accounting for Deferred Compensation Agreements and Bank-Owned Life Insurance (BOLI) (703 KB PDF)
SR letters | 2004
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