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Action Alert No. 06-26
June 29, 2006
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
No Board meetings are planned for the week of July 3, 2006. The next
scheduled Board meeting is Wednesday, July 12, 2006, and topics for that
Board meeting will be announced in next week’s issue of Action
Alert.
OPEN EDUCATION SESSION
No education sessions are planned for the week of July 3,
2006.
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.
June 20, 2006 Board Meeting
Registration
payment arrangements. The Board added a project to its agenda to
determine the accounting for registration payment arrangements. The
proposed guidance would be in the form of an FSP. The Board decided
to:
- Limit the scope of the proposed FSP to registration payment
arrangements
- Separately recognize and measure, for the issuer and holder,
registration payment arrangements using a model consistent with the
accrual of loss contingencies under FASB Statement No. 5, Accounting
for Contingencies, regardless of legal form
- Require disclosures similar to those required in FASB Interpretation
No. 45, Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,
paragraph 13 (a)–(c)
- Apply the proposed FSP using a limited retrospective approach for
all existing arrangements and include examples of the application of
that transition in the proposed FSP.
The Board instructed the staff to prepare a draft of the proposed FSP
with a comment period of 45 days for vote by written ballot. The proposed
FSP would be effective in the first fiscal year after issuance of the
final FSP.
Conceptual
framework. The Board continued its discussion of matters related
to the elements and recognition phase of this joint IASB/FASB project by
analyzing the application of the working definition of an asset to certain
situations—a forward contract between a farmer and a canner for corn, and
an entity’s own shares. These situations were analyzed to address the
following concerns raised by the Boards at their joint meeting in April
2006:
- The need for a better understanding of what constitutes an
economic resource
- The question of whether the asset is the economic resource or the
right
- The contention that the proposed definition of an asset would result
in an entity’s own shares being considered an asset.
The proposed working definition of an asset considered in April was as
follows:
An asset is a present economic resource of an entity. An asset
of an entity has three essential characteristics:
- There is an underlying economic resource.
- The entity has rights or other privileged access to the economic
resource.
- The economic resource and the rights or other privileged access
both exist at the financial statement date.
Applying this working definition to a forward contract to buy/sell corn
between a canner and a farmer, the Board concluded that:
- The economic resources are the promises in the contract; the
canner’s economic resource is the farmer’s promise to deliver corn at
the agreed price, and the farmer’s economic resource is the canner’s
promise to take delivery of the corn and to pay the agreed price. In
this situation, the economic resource is not the corn.
- The canner and the farmer are connected to their economic
resource—the promises they received—by means of contractual rights that
provide each with the means to control and benefit from their economic
resource.
- The economic resources and the rights to the economic resources both
exist during the period the contract is outstanding.
Thus, the canner and the farmer both have assets. Subsequent parts of
the conceptual framework project will assess whether assets are recognized
and how they are measured and presented.
In considering an entity’s own shares (unissued shares and treasury
shares) the Board concluded that they are not assets, as the essential
characteristics are not met. There are no promises with external
parties—no one will require actions (or inactions) to be taken.
The IASB separately discussed the same issues and reached similar
conclusions. In July, the FASB and the IASB will consider the revised
working definitions of assets and liabilities and amplifying text,
together with further examples illustrating their application.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
August. 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, July 10, 2006—FASB Education Session
Wednesday, July 12,
2006—FASB Board Meeting
Wednesday, July 12, 2006—FASB Education
Session
Wednesday, July 19, 2006—FASB Board Meeting
Wednesday, July
19, 2006—FASB Education Session
Wednesday, July 26, 2006—FASB Board
Meeting
Wednesday, July 26, 2006—FASB Education Session
Wednesday,
August 2, 2006—FASB Board Meeting
Wednesday, August 2, 2006—FASB
Education Session
Friday, August 4, 2006—Liaison Meeting with the
Financial Managers Society (canceled)
Wednesday, August 9,
2006—FASB Board Meeting
Wednesday, August 9, 2006—FASB Education
Session
Wednesday, August 16, 2006—FASB Board Meeting
Wednesday,
August 16, 2006—FASB Education Session
Wednesday, August 23, 2006—FASB
Board Meeting
Wednesday, August 23, 2006—FASB Education
Session
Monday, August 28, 2006—Liaison Meeting with Edison Electric
Institute and American Gas Association
Wednesday, August 30, 2006—FASB
Board Meeting
Wednesday, August 30, 2006—FASB Education Session
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