Action Alert No. 04-10
March 11, 2004

NOTICE OF MEETINGS

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

Tuesday, March 16, 2004, 9:00 a.m.

The Board meeting will be on Tuesday instead of Wednesday.

  1. Revenue recognition. The Board will discuss the following three topics: (a) clarification of certain revenue recognition principles and related implementation guidance discussed at a prior Board meeting, (b) issues related to the initial fair value measurement of performance obligations, and (c) the nature of obligations in the scope of the standard on revenue recognition. (Estimated 60-minute discussion.)

  2. Short-term convergence: income taxes. The Board will discuss the scope, timing, and sequence of deliberations in the income tax portion of the short-term convergence project. (Estimated 60-minute discussion.)

  3. Equity-based compensation. The Board will discuss additional issues that have arisen during the drafting of the proposed Statement. (Estimated 60-minute discussion.)

  4. 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, March 16, 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 24, 2004 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.

OPEN MEETING OF THE EMERGING ISSUES TASK FORCE
(EITF meetings are available by audio webcast and telephone.)

Wednesday, March 17, 2004, 10:00 a.m. – 5:15 p.m.
Thursday, March 18, 2004, 8:00 a.m. – 4:00 p.m.

The task force plans to discuss all of the following issues in the order shown (the task force plans to discuss the first five issues on Wednesday and to begin discussions on Thursday with Issue 04-1):

  1. Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments"

  2. Issue No. 02-14, "Whether the Equity Method of Accounting Applies When an Investor Does Not Have an Investment in Voting Stock of an Investee but Exercises Significant Influence through Other Means"

  3. Issue No. 03-16, "Accounting for Investments in Limited Liability Companies"

  4. Issue No. 03-13, "Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report Discontinued Operations"

  5. Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share"

  6. Issue No. 04-1, "Accounting for Preexisting Contracts between the Parties to a Purchase Business Combination"

  7. Issue No. 03-9, "Interaction of Paragraphs 11 and 12 of FASB Statement No. 142, Goodwill and Other Intangible Assets, Regarding Determination of the Useful Life and Amortization of an Intangible Asset"

  8. Issue No. 04-2, "Whether Mineral Rights Are Tangible or Intangible Assets and Related Issues"

  9. Issue No. 04-3, "Mineral Assets: Impairment and Business Combinations"

  10. Issue No. 04-4, "Allocation of Goodwill to Reporting Units for a Mining Enterprise."

In addition, the SEC staff will announce an addendum to EITF Abstracts, Topic No. D-98, "Classification and Measurement of Redeemable Securities," to clarify its position relating to the interaction of Topic D-98 and FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and its related implementation and transition guidance.

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.

March 3, 2004 Board Meeting

Interpretation of Statement 87. The Board considered the following three alternatives for measuring a cash balance pension plan obligation: (1) current methodology approach, (2) hybrid approach, and (3) separation approach.

The Board decided that alternative 2, the hybrid approach, is the appropriate methodology for measuring a cash balance pension plan obligation. Under that approach, entities would apply the following measurement guidance:

  1. For cash balance pension plans with a fixed interest crediting rate, the obligation would be measured by projecting forward the plan participants’ notional account balances at the fixed crediting rate as stipulated in the plan’s provisions and discounting the resulting amount using a discount rate determined in accordance with paragraph 44 of FASB Statement No. 87, Employers’ Accounting for Pensions.

  2. For cash balance pension plans with a market or market-related (variable) interest crediting rate, the obligation would be measured by reference to the plan participants’ notional account balances. Entities would not project and discount plan participants’ notional account balances.

Equity-based compensation. The Board discussed certain transition issues relating to the proposed Statement. The Board decided:

  1. Upon adoption of the proposed Statement by a public entity, no adjustment would be made to the deferred tax balance associated with awards of equity instruments accounted for under the fair-value-based method in FASB Statement No. 123, Accounting for Stock-Based Compensation, or under the intrinsic value method in APB Opinion No. 25, Accounting for Stock Issued to Employees (except if the awards are classified as liability instruments under the proposed Statement). For awards that continue to be classified as equity instruments under the proposed Statement, a public entity would recognize additional income tax effects to the extent additional compensation cost is recognized over the remaining service period. The entity would settle the deferred tax balance upon exercise or other settlement of the award, taking into account the total compensation cost recognized over the award’s entire life (under Statement 123 and Opinion 25) for purposes of calculating the tax benefit related to the excess of the tax deduction for those equity instruments over the recognized compensation cost.

  2. For awards that currently are classified as equity instruments under Statement 123 and Opinion 25, but would be classified as liability instruments under the proposed Statement, the transition adjustment, if any, would be calculated for each individual employee’s award rather than calculating it net for all awards.

  3. The proposed Statement would not include any specific transition guidance for compensation cost capitalized prior to the effective date.

FASB STAFF POSITION GUIDANCE AVAILABLE

On March 10, 2004, a majority of the Board directed the staff to issue the following proposed FSPs for a 30-day comment period:

  1. FSP FAS 106-b, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003"

  2. FSP FIN 46(R)-a, "Technical Correction of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, relating to its effects on Question No. 12 of EITF Issue No. 96-21, ‘Implementation Issues in Accounting for Leasing Transactions involving Special-Purpose Entities.’"

Those proposed FSPs will be available on the FASB website by the close of business on Friday, March 12, and comments are requested by April 12, 2004.

FUTURE OPEN MEETINGS

The following is a list of open meetings tentatively scheduled through April. 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 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
Wednesday, April 7, 2004—FASB Board Meeting
Wednesday, April 7, 2004—FASB Education Session
Monday, April 12, 2004—User Advisory Council Meeting, New York City
Wednesday, April 14, 2004—FASB Board Meeting
Wednesday, April 14, 2004—FASB Education Session
Thursday, April 22, 2004—IASB/FASB Joint Board Meeting, London
Friday, April 23, 2004—IASB/FASB Joint Board Meeting, London
Wednesday, April 28, 2004—FASB Board Meeting
Wednesday, April 28, 2004—FASB Education Session