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Action Alert No. 05-16
April 21, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, April 27, 2005, 9:00 a.m.
- Business
combinations: purchase method procedures. The Board will discuss
the effective dates and comment periods for the forthcoming Exposure
Drafts for business combinations and noncontrolling interests and any
other matters identified in drafting. (Estimated 30-minute
discussion.)
- Fair
value measurement. The Board will continue redeliberations of
the proposed Statement on fair value measurements. The Board will
discuss issues raised by respondents on disclosures, measurement of
blocks, and the scope of the standard. (Estimated 90-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, April 27, 2005, 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 May 4, 2005
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 roundtable discussions, and
through other communication channels. Decisions become final only after a
formal written ballot to issue a final Statement or
Interpretation.
April 13, 2005 Board Meeting
Beneficial
interests, qualifying
special-purpose entities and isolation of transferred assets, and
servicing
rights.
The Board completed deliberations on the issues presented in the
projects on servicing rights, beneficial interests, and qualifying
special-purpose entities.
The Board decided for all three projects:
- To establish 60-day comment periods for the Exposure Drafts
- To require that application of the measurement provisions be
effective at the earlier of fiscal years beginning after December 15,
2005, or fiscal years that begin during the quarter in which the final
Statements are issued.
Separately, the Board decided the following for each project:
Beneficial interests
- To require no incremental disclosures in regard to the Board’s
decision to allow a fair value option election for hybrid financial
instruments with embedded derivatives that otherwise would require
bifurcation
- To apply the decisions reached in the beneficial interests project
prospectively to only new transactions.
Qualifying special-purpose entities and isolation of transferred
assets
- To require that the derecognition provisions for a transfer of a
portion of a financial asset be applied prospectively:
- For public companies—all transfers of financial assets occurring
after the end of the first fiscal quarter that begins after the
issuance of the final Statement
- For privately held companies—all transfers that occur in the first
fiscal year that begins after the issuance of the final Statement.
- To require that (a) a participating interest be defined as
proportionate ownership of the cash flows of the original financial
asset that does not involve recourse or subordination by any party to
the transaction and is an interest in a single, original financial asset
and (b) each resulting participating interest meet all of the conditions
of paragraph 9 of FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities
(in particular, paragraph 9(b)).
Servicing rights
- To require that the initial measurement of all servicing rights at
fair value be applied prospectively to new servicing rights recognized
- To require that the option to subsequently measure servicing rights
at fair value be applied prospectively to all new servicing rights
recognized after the election to subsequently measure at fair value is
made and to all existing servicing rights on the date the election is
made with a cumulative effect adjustment to reflect existing servicing
rights at fair value upon election
- To include in the Exposure Draft’s notice to recipients a request
that asks constituents whether they believe entities should be
permitted, in conjunction with the adoption of the final Statement, to
transfer all securities from the available-for-sale category to the
trading category without calling into question an entity’s treatment of
such securities under FASB Statement No. 115, Accounting for Certain
Investments in Debt and Equity Securities.
Financial
instruments: derivatives implementation. The Board did not object
to the staff’s posting of proposed Statement 133 Implementation Issues No.
B38, "Evaluation of Net Settlement with Respect to the Settlement of a
Debt Instrument through Exercise of an Embedded Put Option or Call
Option," and No. B39, "Application of Paragraph 13(b) to Call Options That
Are Exercisable Only by the Debtor," to the FASB website for a comment
period of 35 days.
The Board decided that the effective date of these Implementation
Issues would be the first day of the first fiscal quarter beginning after
September 15, 2005. The new implementation guidance would be applied
prospectively for all existing contracts and future transactions as of the
effective date.
The Board decided that the transition for both issues would follow the
guidance in Section II (A) of Statement 133 Implementation Issue No. K5,
"Transition Provisions for Applying the Guidance in Statement 133
Implementation Issues." Under that guidance, with respect to derivatives
that are required to be bifurcated under the new guidance (as would be the
case for instruments affected only by Implementation Issue B38), the
effects of initially complying with the revised implementation guidance as
of the effective date would be reported as a cumulative effect adjustment.
If under the newly issued implementation guidance an entity may not
account separately for an embedded derivative that has been separately
accounted for previously (as would be the case for those instruments
affected only by Implementation Issue B39), the carrying amount of the
related hybrid instrument at the effective date should be the sum of the
carrying amount of the host contract and the fair value of the embedded
derivative, with no cumulative effect adjustment recorded. Subsequently,
any premium or discount on the host contract would be amortized or
accreted to par prospectively as an adjustment to the yield of the
underlying debt host contract.
The Board also decided to issue a technical revision to Statement 133
Implementation Issue No. B16, "Calls and Puts in Debt Instruments." The
revisions relate to certain examples in Implementation Issue B16. As
revised, the examples will only comment on whether the embedded put or
call is clearly and closely related, thereby requiring further analysis
under paragraphs 12(b) and 12(c) to determine if the embedded put of call
is required to be bifurcated and separately accounted for. These revisions
would be posted at the time the Board gives final clearance for posting
Implementation Issues B38 and B39.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
May. 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, May 4, 2005—FASB Board Meeting
Wednesday, May 4,
2005—FASB Education Session
Monday, May 9, 2005—American Accounting
Association Liaison Meeting
Wednesday, May 11, 2005—FASB Board
Meeting
Wednesday, May 11, 2005—FASB Education Session
Wednesday,
May 18, 2005—FASB Board Meeting
Wednesday, May 18, 2005—FASB Education
Session
Friday, May 20, 2005—American Petroleum Institute Risk Control
and Accounting Committee Liaison Meeting
Tuesday, May 24,
2005—Equipment Leasing Association of America Liaison
Meeting
Wednesday, May 25, 2005—FASB Board Meeting
Wednesday, May
25, 2005—FASB Education Session
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