Action Alert No. 03-36
September 10, 2003

NOTICE OF MEETINGS

OPEN BOARD MEETINGS

Wednesday, September 17, 2003, 9:00 a.m.

  1. Revenue recognition. The Board will continue to discuss a conceptual model for analyzing assets and liabilities arising from contracts and contractual rights and obligations. Specifically, the Board will discuss illustrations of the conceptual model by applying it to examples relating to existing guidance. Those examples will include a long-term construction contract, a common multiple-element arrangement in the telecommunications industry, and, possibly, a real estate transaction. (Estimated 60-minute discussion.)

  2. 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.

Wednesday, September 17, 2003, 1:00 p.m.

  1. Consolidation of variable interest entities. The Board will consider modifying FASB Interpretation No. 46, Consolidation of Variable Interest Entities, to address the following issues:

    1. Whether the term investor in part (i) of the last sentence of paragraph 5 should include the investor’s related parties as indicated in footnote 6

    2. Whether to change the second reference to paragraph 5 in paragraph 11 (regarding development stage enterprises) to paragraph 5(a) to clarify that paragraph 11 does not exempt development stage companies from the requirements of paragraph 5(b)

    3. Whether events other than those listed in paragraph 15 should require an enterprise to reconsider whether it is the primary beneficiary of a variable interest entity

    4. Whether a decision maker’s fee should be considered part of the expected returns of a variable interest entity under paragraph 8(c) if the decision maker has no exposure to the expected losses of the entity and no right to expected residual returns except a fee that has no expected variability

    5. Whether to provide a limited-scope exception for a reporting entity’s interest in a variable interest entity, or potential variable interest entity, when

      1. The variable interest entity or potential variable interest entity existed as of the Interpretation’s issuance and effective dates, and

      2. The reporting entity, after making exhaustive efforts, is unable to obtain information necessary to determine if the entity is a variable interest entity or to determine whether the reporting entity is the primary beneficiary of the variable interest entity.

    The Board also will consider whether to direct the staff to issue a proposed FASB Staff Position (FSP) to defer the effective date of Interpretation 46 until the end of the first interim or annual period ending after December 15, 2003, for an interest held by a public entity in a variable interest entity that (a) was not previously considered to be a special-purpose entity and (b) has assets that are predominately nonfinancial. Examples of the types of interest to be considered by the Board are franchise arrangements, supplier arrangements, and troubled debt restructurings. (Estimated 60-minute discussion.)

  2. Stock-based compensation. The Board will continue its discussion of accounting for modifications and settlements of stock-based compensation awards. (Estimated 90-minute discussion.)

OPEN EDUCATION SESSIONS

September 17, 2003, immediately following both the a.m. and p.m. Board meetings

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the September 24 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education sessions.

OPEN MEETING WITH REPRESENTATIVES OF THE FINANCIAL MANAGERS SOCIETY

Friday, September 12, 2003, 10:30 a.m.

The Board will meet with representatives of the Financial Institutions Accounting Committee of the Financial Managers Society 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.

September 3, 2003 Board Meeting

Permitted activities of qualifying special-purpose entities (SPEs). The Board discussed issues raised by respondents to the FASB Exposure Draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, and at the FASB Open Roundtable Discussion on August 28, 2003. The Board considered alternative approaches to achieve the original objectives of the project, for example, restricting rollovers of beneficial interests by qualifying SPEs instead of prohibiting certain combinations of interests in qualifying SPEs that roll over beneficial interests. The Board expressed support for the general approach in the Exposure Draft but reached no decisions about specific aspects of that approach.

Open discussion: Board-directed FASB Staff Positions. The Board considered whether to delay the effective date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, for both nonregistered investment companies and certain decision makers and directed the staff to issue proposed FSPs for those situations. See the links to proposed FSPs FIN 46-a and FIN 46-b below.

FASB STAFF POSITION GUIDANCE AVAILABLE

A majority of the Board did not object to the release of the final FSP FAS 146-1, "Determining Whether a One-Time Termination Benefit Offered in Connection with an Exit or Disposal Activity Is, in Substance, an Enhancement to an Ongoing Benefit Arrangement."

That final FSP was effective when posted to the FASB website on September 3, 2003, and will remain on the website until it can be incorporated into printed FASB literature.

Also, the Board did not object to the release of the following proposed FSPs for public comment:

  1. Proposed FSP FIN 46-a, "Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, for Nonregistered Investment Companies." The proposed FSP was posted to the FASB website on September 3, 2003, and comments are requested by October 3, 2003.

  2. Proposed FSP FIN 46-b, "Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, for Certain Decision Makers." The proposed FSP was posted to the FASB website on September 3, 2003, and comments are requested by October 3, 2003.

  3. Proposed FSP FIN 46-c, "Impact of Kick-Out Rights Associated with the Decision Maker on the Computation of Expected Residual Returns under Paragraph 8(c) of FASB Interpretation No. 46, Consolidation of Variable Interest Entities." The proposed FSP was posted to the FASB website on September 3, 2003, and comments are requested by October 3, 2003.

  4. Proposed FSP FIN 46-d, "Treatment of Fees Paid to Decision Makers and Guarantors as Described in Paragraph 8 in Determining Expected Losses and Expected Residual Returns of a Variable Interest Entity under FASB Interpretation No. 46, Consolidation of Variable Interest Entities." The proposed FSP was posted to the FASB website on September 10, 2003, and comments are requested by October 10, 2003. (This proposed FSP replaces a previously unnumbered proposed FSP, "Treatment of Fees Paid to Decision Makers and Guarantors in Determining Expected Losses and Expected Residual Returns of a Variable Interest Entity under FASB Interpretation No. 46, Consolidation of Variable Interest Entities," which was posted to the FASB website for comment in March 2003.)

FUTURE OPEN MEETINGS

The following is a list of open meetings tentatively scheduled through October. 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.

Wednesday, September 24, 2003—FASB Board Meeting
Wednesday, September 24, 2003—FASB Education Session
Thursday, September 25, 2003—Financial Accounting Standards Advisory Council Meeting
Wednesday, October 1, 2003—FASB Board Meeting
Wednesday, October 1, 2003—FASB Education Session
Thursday, October 2, 2003—Liaison Meeting with the American Gas Association
Tuesday, October 7, 2003—User Advisory Council Meeting, New York City
Wednesday, October 8, 2003—FASB Board Meeting
Wednesday, October 8, 2003—FASB Education Session
Thursday, October 9, 2003—Liaison Meeting with the National Investor Relations Institute
Friday, October 10, 2003—Liaison Meeting with the AICPA Private Companies Practice Section Technical Issues Committee
Wednesday, October 15, 2003—FASB Board Meeting
Wednesday, October 15, 2003—FASB Education Session
Wednesday, October 22, 2003—Joint FASB/IASB Meeting, Canada
Thursday, October 23, 2003—Joint FASB/IASB Meeting, Canada
Wednesday, October 29, 2003—FASB Board Meeting
Wednesday, October 29, 2003—FASB Education Session