Action Alert No. 04-07
February 19, 2004
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)
Wednesday, February 25, 2004, 9:00 a.m.
- Business combinations: purchase method procedures. The Board will discuss certain issues that have been identified by resource group members and staff in drafting the purchase method procedures Exposure Draft. Those issues include, but are not limited to, (a) the recognition and measurement of employee benefits that are accounted for under FASB Statement No. 112, Employers’ Accounting for Postemployment Benefits, and leases that are accounted for under FASB Statement No. 13, Accounting for Leases, and (b) the effective date for the proposed changes for purchase method procedures and noncontrolling interests. (Estimated 75-minute discussion.)
- Fair value measurement. The Board will discuss transition and effective date of a proposed Statement on fair value measurements. (Estimated 30-minute discussion.)
- FASB Staff Position: Medicare Act of 2003. The Board will discuss further the issues raised at the February 18, 2004 Board meeting related to the effective date and transition of the proposed guidance on accounting for the effects of the federal subsidy under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. (Estimated 30-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.
OPEN EDUCATION SESSION
Wednesday, February 25, 2004, immediately following the Board meeting
The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the March 3, 2004 Board meeting. 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 11, 2004 Board Meeting
FASB Staff Position: Medicare Act of 2003. The Board discussed the federal subsidy to plan sponsors provided under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The Board decided that the subsidy should be accounted for as a component of net periodic postretirement benefit cost within the context of FASB Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. However, the Board did not decide on the recognition and measurement of the subsidy. At an upcoming meeting, the Board will consider staff views on the recognition and measurement for the subsidy with the expectation that it will direct the staff to issue a second FSP providing guidance on the accounting for the subsidy.
Interpretation of Statement 87. The Board discussed a revised definition of a cash balance pension plan. Based on its discussions with the Board at its January 21, 2004 meeting and with the project’s resource group, the staff submitted the following revised definition, which the Board generally agreed is satisfactory for purposes of the project:
A cash balance pension plan is a defined benefit pension plan (as defined in the glossary of Statement 87) that defines the promised employee benefit by reference to a notional account balance. An employee’s notional account balance is increased with periodic notional principal credits and notional fixed and/or variable interest or investment credits, and may be increased for other notional ad hoc credits. Upon separation of employment, for any reason, by a fully vested employee, the employee is entitled to the notional account balance as either a lump sum or an actuarially equivalent annuity either immediately or at a future date. Subject to the terms of the plan or regulatory requirements, an employee may be entitled to a settlement amount greater than the notional account balance due to the crediting of future interest (or investment) credits that are not conditioned upon future service.
Qualifying special-purpose entities and isolation of transferred assets. The Board discussed issues related to the legal isolation criteria set forth in paragraph 9(a) of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The Board also considered issues related to transfers of undivided interests in financial assets and discussed alternatives to the Board’s decision that the proposed amendment to Statement 140 require that transfers of undivided interests in portions of financial assets be accomplished using a qualifying special-purpose entity (SPE) in order to receive sale accounting treatment.
The Board tentatively agreed that further guidance and clarification was needed about the criteria set forth in paragraph 9(a). Specifically, the Board directed the staff to enhance guidance in paragraphs 104–106 on loan participations, provide further detail about the right of setoff in bankruptcy or receivership, clarify that depositors of a financial institution are considered creditors of that institution in the event of bankruptcy or receivership, and discuss additional implementation guidance with the Public Company Accounting Oversight Board (PCAOB).
Additionally, the Board addressed whether to require that transfers of undivided interests in portions of financial assets be accomplished using a qualifying SPE in order to receive sale accounting treatment. The Board deferred a decision on that issue and agreed to reconsider it at the March 10, 2004 Board meeting.
Equity-based compensation (EBC). The Board discussed the cost-benefit procedures and analyses performed to date, including discussions with constituents, consultation with valuation experts, review of relevant research studies, and field visits, and concluded that the findings of those procedures and analyses are sufficient to support the issuance of an Exposure Draft.
The Board also discussed various views about criteria to be used in selecting a valuation approach to be used to estimate the fair value of EBC arrangements in order to achieve the fair value measurement objective of the proposed Statement. The Board decided that the matter could be resolved in the drafting process.
The Board authorized the staff to proceed to a draft of the Exposure Draft for vote by written ballot. No Board member indicated an intention to express an alternative view on the Exposure Draft.
AcSEC CLEARANCE
February 11, 2004 Board Meeting
AcSEC document. The Board met with representatives of the AICPA's Accounting Standards Executive Committee (AcSEC) and discussed clearance of the AICPA Statement of Position (SOP), Accounting by Insurance Enterprises for Deferred Acquisition Costs on Internal Replacements Other Than Those Specifically Described in FASB Statement No. 97. The Board requested that AcSEC consider certain revisions to the proposed SOP and submit a revised document to the Board for further consideration at a future meeting.
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, 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
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