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Action Alert No. 03-49
December 11, 2003
NOTICE OF MEETINGS
OPEN BOARD MEETINGS
Wednesday, December 17, 2003, 8:30 a.m.
The Board meeting will begin at 8:30 a.m. instead of 9:00
a.m.
- Revenue
recognition. The Board will discuss various issues related to
“enforceable" rights and obligations as that term is utilized in the
conceptual model for revenue recognition. (Estimated 60-minute
discussion.)
- Modifications
of Interpretation 46. The Board will continue redeliberating the
proposed modifications to FASB Interpretation No. 46, Consolidation
of Variable Interest Entities. (Estimated 60-minute discussion.)
- Business
combinations: purchase method procedures (including combinations between
mutual enterprises). The Board will discuss the following issues
related to its project on combinations between mutual enterprises: (a)
whether to provide guidance for determining the fair value of a mutual
enterprise in the absence of active markets, (b) clarifications to the
Board’s decisions related to the recognition of goodwill, (c) the
effective date and transition provisions, and (d) the separate
recognition of core deposits for credit unions. The Board also will
consider whether to require disclosure of the basis for determining the
fair value of the acquired business in all business combinations.
Additionally, the staff will discuss with the Board its recommended
next steps related to the issue of whether to expand the scope of this
project to include both business combinations and “basket purchases" of
assets (and related liabilities) as well as business combinations.
(Estimated 60-minute discussion.)
- Fair
value measurement. The Board will discuss clarifications to the
fair value hierarchy and related issues. (Estimated 60-minute
discussion.)
- Open discussion. If necessary, the Board will allow time to
discuss minor issues with staff members on technical projects or
administrative matters. Those discussions are held following regular
Board meetings as topics come up.
Thursday, December 18, 2003, 8:30 a.m., if needed
The Board meeting will begin at 8:30 a.m. instead of 9:00
a.m.
The Board will continue discussing, if needed, topics from the December
17, 2003 Board meeting.
OPEN EDUCATION SESSION
No open education sessions are planned for the week of December 15,
2003.
OPEN MEETING WITH REPRESENTATIVES OF THE AMERICAN INSURANCE
ASSOCIATION
Thursday, December 18, 2003, 1:00 p.m.
The Board will meet with representatives of the American Insurance
Association’s Financial Management Issues Committee to discuss matters of
mutual interest.
BOARD ACTIONS
The Board Actions are provided for the information and convenience
of constituents who want to follow the Board’s deliberations. All of the
conclusions reported are tentative and may be changed at future Board
meetings. Decisions are included in an Exposure Draft for formal comment
only after a formal written ballot. Decisions in an Exposure Draft may be
(and often are) changed in redeliberations based on information provided
to the Board in comment letters, at public hearings, and through other
communication channels. Decisions become final only after a formal written
ballot to issue a final Statement or Interpretation.
December 3, 2003 Board Meeting
Fair
value measurement. The Board discussed whether to include fair
value disclosures in the scope of the project. The Board agreed that the
disclosure objective should be to provide information useful in assessing
the extent to which recognized assets and liabilities are measured at fair
value, the methods used to determine those measurements, and the effect of
those measurements on earnings. The Board plans to discuss specific
disclosure requirements consistent with that objective at a future
meeting.
Business
combinations: purchase method procedures. The Board discussed
whether to modify the definition of a business in EITF Issue No. 98-3,
“Determining Whether a Nonmonetary Transaction Involves Receipt of
Productive Assets or of a Business," which is used to determine whether a
transaction represents a business combination that would be in the scope
of the proposed Statement. The Board did not reach a decision but, rather,
asked the staff to analyze two issues for discussion at a future meeting:
(1) suggested modifications to the definition of a business in Issue 98-3
made by the Board and (2) the implications of an approach that would
expand the scope of the proposed Statement to include both business
combinations and “basket purchases" of assets (and related liabilities)—an
approach that might eliminate or mitigate the need to refer to the
definition of a business for the purpose of determining the scope of the
proposed Statement.
The Board also discussed whether guidance is needed for the subsequent
accounting for acquired in-process research and development (IPR&D)
assets that are recognized as intangible assets as part of a business
combination beyond that currently provided in existing literature. The
Board decided to amend FASB Statement No. 142, Goodwill and Other
Intangible Assets, to clarify that acquired IPR&D assets that are
recognized as intangible assets as part of a business combination should
be considered indefinite-lived until the completion or abandonment
of the associated research and development efforts. At the point of
completion, the reporting entity would make a separate determination of
the useful life of the completed asset. Accordingly, prior to completion
or abandonment, the acquired IPR&D assets would not be amortized and
would be subject to the impairment review and testing provisions for
indefinite-lived assets.
Financial
instruments: liabilities and equity. The Board discussed various
approaches to distinguish equity from liabilities and assets for simple
financial instruments—options and forward contracts. The Board decided to
pursue an approach that considers both liquidity (form of settlement and
discretion) and whether an ownership relationship is established by the
financial instrument between the issuer of the shares and the
counterparty. Under that approach, an instrument potentially settled by
issuing (or redeeming) an entity’s own shares can be equity (or reduce
equity) only if it cannot require net cash settlement and the
counterparty’s payoff at settlement moves in the same direction as the
issuer’s share price. For purposes of comparison, the Board also decided
to continue to consider an approach that would narrowly define equity by
potentially limiting the definition to nonredeemable common shares.
Additionally, in the interest of international convergence, the Board also
decided to continue to consider the proposed approach in the forthcoming
revised IAS 32.
Loan
commitments. The Board met with representatives of the Mortgage
Bankers Association of America and discussed the process for issuing
single-family residential mortgage loan commitments (interest rate lock
commitments), their characteristics, and related valuation issues, as well
as the differences between commercial loan commitments and single-family
residential mortgage loan commitments. The meeting was educational and no
Board decisions were made.
FASB STAFF POSITION GUIDANCE AVAILABLE
On December 10, 2003, it was announced that a majority of the Board had
not objected to the release of the final FSP FIN
45-2, "Whether FASB Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, Provides Support for
Subsequently Accounting for a Guarantor’s Liability at Fair Value." This
final FSP is effective as of December 10, 2003, and is available on the
FASB website where it will remain until it can be incorporated into
printed FASB literature.
Also, a majority of the Board directed the FASB staff to release the
proposed FSP
FAS 106-a, "Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003."
This proposed FSP will be posted to the FASB website by the end of
business on Thursday, December 11, 2003, and comments are requested by
December 26, 2003.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
January. Because schedules may change, please check the FASB calendar before
finalizing your plans. Revisions to this list since the last issue of
Action Alert are highlighted in bold.
Tuesday, January 6, 2004—Liaison Meeting with the AICPA Audit Issues
Task Force
Wednesday, January 7, 2004—FASB Board Meeting
Wednesday,
January 7, 2004—FASB Education Session
Wednesday, January 14, 2004—FASB
Board Meeting
Wednesday, January 14, 2004—FASB Education
Session
Thursday, January 15, 2004—EITF Meeting
Wednesday, January
21, 2004—FASB Board Meeting
Wednesday, January 21, 2004—FASB Education
Session
Wednesday, January 28, 2004—FASB Board Meeting
Wednesday,
January 28, 2004—FASB Education Session
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