|
Revised 01/30/04—See below
Action Alert No. 04-04
January 29, 2004
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and
telephone.)
Wednesday, February 4, 2004, 9:00 a.m.
- Business
combinations: purchase method procedures. The Board will
continue its discussions from the December 3, 2003 meeting about
whether, and if so, how 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." (Estimated 45-minute discussion.)
- Short-term
convergence. The Board will discuss several issues that
have arisen during the drafting of the proposed Statement on
liability classification. (Estimated 60-minute discussion.)
- [Revised 1/30/04—This topic has been
postponed to a future Board meeting.] Qualifying
special-purpose entities and isolation of transferred
assets. The Board will discuss 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 is
expected to reconsider issues related to transfers of undivided
interests in financial assets and may discuss alternatives to the
Board decision that the proposed amendment to Statement 140
require that transfers of undivided interests in portions of
financial assets be accomplished via a qualifying special-purpose
entity (SPE) in order to receive sale accounting treatment.
(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.
OPEN EDUCATION SESSIONS
Wednesday, February 4, 2004, immediately following the Board
meeting
Thursday, February 5, 2004, 9:00 a.m.
The Board will hold educational, non-decision-making sessions to
discuss topics that are anticipated to be discussed at the February
11, 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.
January 21, 2004 Board Meeting
Financial
instruments: liabilities and equity. The Board continued its
consideration of an approach for distinguishing equity from
liabilities and assets that is based on liquidity and ownership
relationship criteria. The Board is comparing that approach
(Approach A) with alternative approaches based on a narrower view of
equity (Approach B) and on the revised International Accounting
Standard 32, Financial Instruments: Disclosure and
Presentation (Approach E), which also incorporates notions of
liquidity and ownership relationship. The Board made the following
decisions regarding the application of the proposed approaches to
simple instruments including: mandatorily redeemable shares, shares
that the issuer is economically compelled to redeem, and obligations
requiring an entity to issue its shares.
The Board decided that under Approaches A, B, and E, mandatorily
redeemable shares would be analyzed as simple instruments that meet
the definition of a liability, but it acknowledged that certain
issues need to be addressed at future Board meetings regarding
measurement and the scope of the proposed Statement. However, the
Board decided not to eliminate the possible alternative of analyzing
mandatorily redeemable shares as complex instruments, if such an
approach was later deemed to result in more consistent accounting
for instruments with similar characteristics.
The Board also decided the following matters concerning
mandatorily redeemable financial instruments:
- Requirements for redemption that are far in the future, or are
required by law, meet the definition of mandatorily
redeemable. However, relevant facts and circumstances would be
analyzed to determine whether redemption of such an instrument is
indeed required.
- If the issuer of the shares has the unilateral right to extend
the contract with the effect of indefinitely deferring redemption,
the instrument would not meet the definition of mandatorily
redeemable. If the holder of the shares has the unilateral right
to extend the contract, or if both parties must agree to extend
the contract, the redemption obligation would be considered a
conditional obligation and the instrument would be accounted for
similarly to puttable shares (the accounting for which will be
discussed at a future meeting). However, the Board noted that the
accounting might depend on whether the extension option is
substantive.
- It would retain the exception in Statement 150 (footnote 13)
that exempts shares requiring redemption only upon liquidation or
termination of the reporting entity from liability classification
in that entity’s separate financial statements. The Board
considered but rejected eliminating that exception or extending it
to the consolidated financial statements of the parent of that
entity. The Board agreed to address the implementation issues that
result from that requirement at future meetings.
- Past practice should be considered as an indicator in
evaluating nonsubstantive and substantive features. However, the
Board directed the staff to further analyze the effects of taking
past practice into consideration in the classification of an
instrument as either a liability or equity.
The Board also decided that economic compulsion should not be
considered in determining whether an obligation exists. However, the
Board directed the staff to further analyze the relationship between
economic compulsion and taking past practice into consideration.
The Board decided that simple instruments embodying obligations
to issue a variable number of shares would be classified as
liabilities if an ownership relationship is not established and that
simple instruments embodying obligations to issue a fixed number of
shares would be classified as equity. Obligations that are
dual-indexed—based partly on the price of the entity’s equity shares
and partly on something else—and prepaid forward sales contracts to
issue a fixed number of shares would be analyzed with complex
instruments at a future Board meeting.
Qualifying
special-purpose entities and isolation of transferred
assets. The Board discussed issues related to the accounting
for transfers of undivided interests in financial assets that have
arisen in the redrafting of the amendment to FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and directed the staff to
perform additional research on legal isolation and the costs of
establishing a qualifying special-purpose entity (SPE).
The Board has requested additional information on the impact of
the right of setoff on legal isolation and has asked whether that
impact is being considered by accountants and attorneys in
evaluating whether a transferred asset has been legally isolated.
The Board also has asked that the staff evaluate whether the
requirement for a qualifying SPE for participation transactions
would resolve the legal isolation issue, particularly in the case of
participation transactions under the jurisdiction of the FDIC.
The Board deferred a decision to reconsider the provisions
related to the accounting treatment for undivided interests and
beneficial interests pending completion of additional research,
which is planned to be completed by the end of January.
Interpretation
of Statement 87. The Board met to discuss the
characteristics of cash balance pension plans and to consider a
proposed working definition of cash balance pension plan.
While no decisions were reached, the Board directed the staff to
refine the proposed working definition to explicitly incorporate the
concept of front-loaded interest crediting and to emphasize that the
term defined benefit plan has the meaning defined in the
glossary to FASB Statement No. 87, Employers’ Accounting for
Pensions. The Board will consider the staff’s refined working
definition of cash balance pension plan 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, February 11, 2004—FASB Board Meeting
Wednesday,
February 11, 2004—FASB Education Session
Wednesday, February 18,
2004—FASB Board Meeting
Wednesday, February 18, 2004—FASB
Education Session
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
|