Action Alert No. 04-06
February 12, 2004

NOTICE OF MEETINGS

OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)

Wednesday, February 18, 2004, 9:00 a.m.

  1. Revenue recognition. The Board will discuss draft recognition and measurement principles, alternative approaches to developing the general standard and any related application guidance, and certain follow-up points from its December 2003 meetings. (Estimated 1-hour discussion.)

  2. Financial instruments: liabilities and equity. The Board will discuss the remaining issues about the classification of simple instruments with characteristics of both equity and liabilities or assets, including the following:

    1. Mandatorily redeemable shares—the effect on classification of date uncertainty for an event certain, past practice of redemption or nonredemption, and fair value redemptions that must or may be settled by the issuance of a variable number of shares

    2. Unconditional rights to receive assets, for example, stock subscriptions receivable and notes in exchange for shares

    3. Unconditional rights to receive shares, for example, a note receivable that must or may be settled by the receipt of a variable number of shares

    The Board also will discuss proposed revisions to the definitions of liabilities and assets and equity, as well as the set of simple instruments and how they are classified under the definitions. (Estimated 2-hour discussion.)

  3. Equity-based compensation. If necessary, the Board will discuss certain issues that may arise during the drafting of the proposed Statement. (Estimated 1.5-hour discussion.)

  4. FASB Staff Position: Medicare Act of 2003. The Board will consider the staff’s proposed alternatives for accounting for the federal plan-sponsor subsidy based on the outcome of the Board’s decision at the February 11, 2004 Board meeting. The specific alternatives to be considered by the Board depend on whether the Board decides that the subsidy should be accounted for (a) within the context of FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, or (b) outside the context of Statement 106. (Estimated 1.5-hour discussion.)

  5. 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.

OPEN EDUCATION SESSION

Tuesday, February 17, 2004, (tentative) 9:00 a.m.

The Board may hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at future Board meetings. Those topics will be posted to the FASB calendar four days prior to the education session.

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.

February 4, 2004 Board Meeting

Business combinations: purchase method procedures. The Board decided 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." The revised definition of a business is as follows:

A business is an integrated set of activities and assets conducted and managed for the purpose of providing:

  1. A return to investors or
  2. Lower costs or other economic benefits directly and proportionately to owners, members, or participants.

A business consists of (1) inputs, (2) processes applied to those inputs, and (3) resulting outputs that are or will be used to generate revenues.

The definition in Issue 98-3 contained the following presumptions that are not included in the modified definition:

  1. An integrated set of activities has to be self-sustaining or continue normal operations to be a business.

  2. Development stage entities are not businesses if they have not commenced planned principal operations.

  3. An integrated set of activities is a business if goodwill is present.

The Board decided to include the modified definition and additional application guidance in the proposed Statement for business combinations and to nullify Issue 98-3 when the proposed Statement becomes effective.

Short-term convergence. The Board discussed several remaining issues relating to the draft of the proposed Statement on liability classification. The Board decided:

  1. The guidance in FASB Technical Bulletin No. 79-3, Subjective Acceleration Clauses in Long-Term Debt Agreements, is consistent with the decisions made in the short-term convergence project and should be carried forward into the proposed Statement. The Board directed the staff to clarify that entities are required to assess at each reporting date the likelihood that a creditor will assert that a subjective acceleration clause has been breached.

  2. The proposed Statement will include guidance that encourages disclosure of events occurring after the balance sheet date that affect liquidity, similar to the disclosures required in paragraph 67 of IAS 1, Presentation of Financial Statements.

  3. To delay issuance of the Exposure Draft to allow the Board time to consider the possible expansion of the scope of this project to include fundamental reconsideration of the definition of working capital and current assets in ARB No. 43, Chapter 3A, “Working Capital—Current Assets and Current Liabilities.” Prior to making that decision, the Board directed the staff to research how those definitions are currently being applied in practice, particularly by reporting entities with a normal operating cycle of longer than one year.

  4. The comment period for the first four proposed Statements issued as a result of the short-term convergence project will end April 13, 2004, as originally announced. The proposed Statement on liability classification will have a comment period of 90 days beginning from the date that document is issued.

FUTURE OPEN MEETINGS

The following is a list of open meetings tentatively scheduled through March. 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, February 25, 2004—FASB Board Meeting
Wednesday, February 25, 2004—FASB Education Session
Wednesday, March 3, 2004—FASB Board Meeting
Wednesday, March 3, 2004—FASB Education Session
Wednesday, March 10, 2004—FASB Board Meeting
Wednesday, March 10, 2004—FASB Education Session
Tuesday, March 16, 2004—FASB Board Meeting
Tuesday, March 16, 2004—FASB Education Session
Wednesday, March 17, 2004—EITF Meeting
Thursday, March 18, 2004—EITF Meeting
Tuesday, March 23, 2004—Financial Accounting Standards Advisory Council Meeting
Wednesday, March 24, 2004—FASB Board Meeting
Wednesday, March 24, 2004—FASB Education Session
Monday, March 29, 2004—Liaison Meeting with the American Bankers Association
Wednesday, March 31, 2004—FASB Board Meeting
Wednesday, March 31, 2004—FASB Education Session