Action Alert No. 05-24
June 16, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, June 22, 2005, 3:30 p.m.
Conceptual
Framework. The Board will continue its discussion of the
qualitative characteristics of accounting information. The Board will
discuss certain characteristics identified in the current framework,
including comparability, understandability, and materiality. The Board
also will discuss whether to add other possible qualitative
characteristics to the framework, such as transparency and ‘true and
fair.’ (Estimated 60-minute discussion.)
OPEN EDUCATION SESSIONS
Wednesday, June 22, 2005, 8:00 a.m.
Thursday, June 23, 2005, 9:00
a.m.
The Board will hold educational, non-decision-making sessions to
discuss topics that are anticipated to be discussed at the June 29 Board
meeting. Those topics will be posted to the FASB calendar four
days prior to the education sessions.
OPEN MEETING OF THE FINANCIAL ACCOUNTING STANDARDS ADVISORY
COUNCIL
(This
meeting is available by audio webcast and telephone.)
Tuesday, June 21, 2005, 9:00 a.m.
The Advisory Council will meet to discuss:
- International convergence
- The Board’s project on derivative disclosures
- The Board’s project on financial performance reporting
- The Board’s project on the Conceptual Framework
- The Board’s project on revenue recognition.
The Advisory Council will hear reports from the chairman of the FASB on
other Board activities and the deputy chief accountant of the SEC on
current accounting-related developments. The Advisory Council also will
hear a report from the associate chief auditor of the Public Company
Accounting Oversight Board.
Closed to Public Observation
The Advisory Council will hold a closed session with members of the
XBRL Consortium to discuss XBRL and its benefits. The closed session,
which will be the last item on the agenda, is expected to begin at
approximately 2:45 p.m.
OPEN MEETING OF THE SMALL BUSINESS ADVISORY COMMITTEE
(This
meeting is available by audio webcast and telephone.)
Wednesday, June 22, 2005, 9:00 a.m.
The Board and the Small Business Advisory Committee (SBAC) will meet to
discuss:
- Private company financial reporting
- The Board’s project on financial performance reporting
- The Board’s project on the Conceptual Framework
- The Board’s codification and retrieval project.
The Advisory Committee will hear a report from the chairman of the FASB
on other Board activities. The group also will discuss minor issues on
technical projects and any new issues that SBAC members believe may
require the Board’s attention.
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.
June 8, 2005 Board Meeting
Liability
extinguishment. The Board discussed the legal rights and
obligations associated with firm offers (that is, unilateral offers to
sell goods that are enforceable and irrevocable) and whether, at a
conceptual level, those rights and obligations meet the definitions of
assets and liabilities set forth in FASB Concepts Statement No. 6,
Elements of Financial Statements. The Board decided that a firm
offer does not convey rights to the offerer that meet the definition of
assets.
The Board also discussed, but did not decide, whether (1) a firm offer
imposes on the offeror a stand-ready obligation to enter into a bilateral
contract that meets the definition of a liability and (2) fair value is
conceptually the most relevant measurement attribute for the stand-ready
obligation to enter into a bilateral contract.
Stable
value investments. The Board approved a change to the scope of the
proposed FASB Staff Position (FSP) to remove the requirement that the
employee has the primary responsibility for directing his or her own
investment allocations with respect to the associated defined-contribution
plan.
The Board approved a revised definition of fully
benefit-responsive that differentiates between traditional guarantee
investment contracts (GICs) (for which the issuer of the investment
contract bears all of the interest rate risk) and synthetic GICs, which
utilize a wrapper contract (for which the fund itself bears the majority
of the interest rate risk though adjustments to future crediting rates).
The Board also decided that the high credit quality criterion be removed
from the definition of fully benefit-responsive and instead would impose a
requirement that an investment contract should no longer be considered
fully benefit-responsive if an event has occurred that may affect the
realization of full contract value due to a decline in creditworthiness of
the contract issuer or wrapper provider.
The Board approved a change in disclosure requirements so that the
proposed FSP would require that (1) all investments and wrapper contracts
should be reported on the balance sheet at fair value, (2) a subtotal for
net assets at fair value should be reported on the balance sheet, and (3)
the “difference between net assets at fair value and net assets” should be
presented on the balance sheet and calculated as the sum of the amounts
necessary to adjust the portion of net assets attributable to all fully
benefit-responsive investment contracts in aggregate from fair value to
contract value.
The proposed FSP also would require a detailed disclosure that supports
amounts presented on the balance sheet for the fair value of all
investments and the adjustment from fair value to contract value for each
investment contract, including the major credit ratings for each
investment contract.
The Board approved that the guidance in the proposed FSP would be
effective for financial statements for annual periods ending after
December 15, 2005. Earlier application would be permitted. Retroactive
application to prior period financial statements (if presented) would be
required.
The proposed FSP would explicitly amend the guidance in AICPA Statement
of Position (SOP) 94-4, Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension
Plans, with respect to the definition of fully benefit-responsive and
the presentation and disclosure of fully benefit-responsive investment
contracts. Amendments to SOP 94-4 will eventually be reflected in the
revised AICPA Accounting and Auditing Guide, Employee Benefit
Plans.
The Board also agreed to amend paragraph 10(h) of FASB Statement
No.133, Accounting for Derivative Instruments and Hedging
Activities, to effectively remove the scope exception provided for
fully benefit-responsive investment contracts reported for at contract
value in accordance with SOP 94-4.
The Board directed the staff to proceed to a draft of a proposed FSP
for vote by written ballot and approved the posting of the proposed FSP to
the FASB website for a 45-day comment period.
Financial
guarantee insurance. The Board decided to add a project to its
agenda to consider the accounting by insurers for financial guarantee
insurance. The Board decided to limit the scope of the project to
contracts issued by insurance companies that indemnify the holder against
losses from payment default on a financial obligation that are not
considered derivative contracts because they meet the exception in
paragraph 10(d) of FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. Thus, the project would be
confined to contracts currently within the scope of FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. However,
consideration of the accounting model will not be limited to the short-
and long-duration models described in Statement 60. The project will not
be limited to claims liability recognition—the Board will consider other
aspects of the accounting model including premium recognition and the
related amortization of deferred policy acquisition costs.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
July. 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, June 29, 2005—FASB Board Meeting
Wednesday, June 29,
2005—FASB Education Session
Wednesday, July 6, 2005—FASB Board
Meeting
Wednesday, July 6, 2005—FASB Education Session
Wednesday,
July 13, 2005—FASB Board Meeting
Wednesday, July 13, 2005—FASB
Education Session
Wednesday, July 20, 2005—FASB Board
Meeting
Wednesday, July 20, 2005—FASB Education Session
Monday, July
25, 2005—Liaison Meeting with the Edison Electric Institute
Wednesday,
July 27, 2005—FASB Board Meeting
Wednesday, July 27, 2005—FASB Board
Meeting
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