|
Action Alert No. 05-43
October 27, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
No Board meetings are planned for the week of October 31, 2005. The
next Board meeting is scheduled for Thursday, November 10, 2005, and will
be announced in next week’s issue of Action Alert.
OPEN EDUCATION SESSION
No education sessions are planned for the week of October 31, 2005.
The next education session is scheduled for Wednesday, November 9, 2005,
and will be announced in next week’s issue of Action Alert.
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, Interpretation, or
FSP.
October 19, 2005 Board Meeting
Agenda decision—first time adoption of International Financial
Reporting Standards (IFRS). The Board considered a constituent request
that it undertake a project relating to the application of U.S. GAAP by
foreign private issuers that have adopted IFRS. The objective of such a
project would be to eliminate certain differences between net income and
equity as reported under U.S. GAAP and the amounts as reported under IFRS
that arise from differing adoption dates of certain otherwise similar
standards. The Board decided not to add such a project to its agenda.
Fair value
option. The Board discussed several approaches for possibly
curtailing a debtor’s recognition of the portion of a liability’s changes
in fair value that is attributable to changes in its own creditworthiness
in conjunction with reporting liabilities at fair value. The Board
rejected any such curtailment of the effect of changes in the debtor’s
creditworthiness. That decision applies to derivative liabilities reported
at fair value under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, as well as any other liabilities
reported at fair value, such as those for which the fair value option will
have been elected.
The Board also discussed specific disclosures related to liabilities
that are reported at fair value and the portion of the fair value change
that is attributable to changes in the debtor’s creditworthiness. Although
the Board indicated preliminary support for disclosing the difference
between the carrying amount of a financial liability and the amount the
entity would be contractually required to pay at maturity to the holder of
the obligation, no decisions regarding disclosures were made at this time.
Instead, disclosures will be addressed comprehensively later in the
Board’s deliberations on this project.
Minimum
revenue guarantees. The Board discussed the summary of comment
letters received on the proposed FSP FIN 45-b, "Application of FASB
Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business
or Its Owners." The Board approved the issuance of a final FSP to be
structured as an amendment to FASB Interpretation No. 45, Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. Minimum revenue guarantees will
be cited as a fifth example under paragraph 3(a), thereby indicating
clearly that minimum revenue guarantees are within the scope of
Interpretation 45.
The Board directed the staff to proceed to a draft of a final FSP for
vote by written ballot.
Life
settlements. The Board decided, based on issues raised in
constituent comment letters, to allow an investor to select either fair
value or the investment method as the relevant measurement attribute for
investments in life settlement contracts. The Board will redeliberate at a
future meeting the remaining issues raised by constituents in the comment
letter process and address how the fair value election would be applied.
The Board also decided not to expand the scope of the final FSP at this
time; however, it requested that the staff return to the Board after the
redeliberations are completed on the current FSP with a formal agenda
request to add a second phase to this project to consider expanding the
scope to include all purchases of life insurance accounted for in
accordance with FASB Technical Bulletin No. 85-4, Accounting for
Purchases of Life Insurance. Finally, the Board decided that the
decisions reached at the meeting would not require reexposure of the
proposed FSP FTB 85-4-a, "Accounting for Life Settlement Contracts by
Investors."
Transition
for the tax effects of share-based payment awards. The Board
discussed comments received from respondents to the proposed FSP FAS
123(R)-c, "Transition Election Related to Accounting for the Tax Effects
of Share-Based Payment Awards." Specifically, the Board addressed an
alternative model for the APIC pool calculation, three modifications to
the proposed calculation, the addition of guidance on blended statutory
tax rates, and a modification to the proposed transition requirements. The
Board decided:
- The model for the APIC pool calculation will remain the same as the
model exposed in the proposed FSP.
- The simplified method will be revised to consider only the
cumulative compensation cost disclosed under FASB Statement No. 123,
Accounting for Stock-Based Compensation, as a deduction in
arriving at the beginning balance of the APIC pool.
- The simplified method will be revised to exclude compensation cost
associated with partially vested awards from the cumulative compensation
cost that is deducted in arriving at the beginning balance of the APIC
pool.
- The simplified method will be revised to exclude the compensation
cost associated with awards that are not ordinarily deductible for tax
purposes (for example, incentive stock options) from the cumulative
compensation cost that is deducted in arriving at the beginning balance
of the APIC pool, unless the award has resulted in a tax deduction prior
to the adoption of FASB Statement No. 123 (revised 2004), Share-Based
Payment, or unless information is not available to determine the
compensation cost associated with such awards.
- No additional guidance for calculating the blended tax rate will be
provided in the final FSP.
- The transition provisions in the final FSP will be clarified as
follows:
- Prior to finalizing its one-time election, an entity should apply
the transition guidance in paragraph 81 of Statement 123(R) and the
guidance in paragraph 68 of Statement 123(R) on classification of
amounts in the statement of cash flows.
- If an entity subsequently elects the simplified transition
provisions of the FSP, it should account for any resulting impact on
the income statement or statement of cash flows by retrospectively
applying the guidance in the final FSP to periods subsequent to the
adoption of Statement 123(R).
The Board directed the staff to proceed to a draft of a final FSP for
vote by written ballot.
FASB DOCUMENT AVAILABLE
Proposed
FSP FAS 133-a, "Accounting for Unrealized Gains (Losses) Relating
to Derivative Instruments Measured at Fair Value under FASB Statement No.
133," was posted to the website on October 21, 2005. Comments are
requested by November 21, 2005. That proposed FSP refers to certain
aspects of the guidance in a final Statement on fair value measurements. A
working draft of the standard
and the basis
for conclusions of that Statement also is available on the FASB
website.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
November. 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.
Monday, November 7, 2005—Liaison Meeting with American Gas
Association
Wednesday, November 9, 2005—No Board Meeting
Scheduled
Wednesday, November 9, 2005—FASB Education
Session
Wednesday, November 9, 2005—Business Combinations Roundtable
Meetings, London
Thursday, November 10, 2005—FASB Board
Meeting
Wednesday, November 16, 2005—FASB Board Meeting
Wednesday,
November 16, 2005—FASB Education Session
Tuesday, November 22,
2005—FASB Board Meeting
Tuesday, November 22, 2005—FASB Education
Session
Tuesday, November 29, 2005—FASB Board Meeting
Tuesday,
November 29, 2005—FASB Education Session
Wednesday, November 30,
2005—Small Business Advisory Committee
|
|