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Action Alert No. 06-23
June 8, 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 June 12, 2006. The
next scheduled Board meeting is Tuesday, June 20, 2006, and topics for
that Board meeting will be announced in next week’s issue of Action
Alert.
OPEN EDUCATION SESSION
Wednesday, June 14, 2006, 9:00 a.m.
The Board will hold an educational, non-decision-making session to
discuss topics that are anticipated to be discussed at a future 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
(This meeting is
available by audio webcast and telephone.)
Thursday, June 15, 2006, 8:30 a.m. – 4:15 p.m.
The Task Force plans to discuss all of the following issues
in the order shown:
- Issue No. 06-2, "Accounting for Sabbatical Leave and Other Similar
Benefits Pursuant to FASB Statement No. 43"
- Issue No. 06-5, "Accounting for Purchases of Life
Insurance—Determining the Amount That Could Be Realized in Accordance
with FASB Technical Bulletin No. 85-4"
- Issue No. 05-1, "Accounting for the Conversion of an Instrument That
Became Convertible upon the Issuer's Exercise of a Call Option"
- Issue No. 05-7, "Accounting for Modifications to Conversion Options
Embedded in Debt Instruments and Related Issues"
- Issue No. 06-3, "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation)"
- Issue No. 06-4, "Accounting for the Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements"
- Issue No. 06-1, "Accounting for Consideration Given by a Service
Provider to Manufacturers or Resellers of Equipment Necessary for an
End-Customer to Receive Service from the Service Provider."
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.
May 31, 2006 Board Meeting
Useful
life and amortization of intangible assets. The Board discussed
the comment letters received on proposed FSP FAS 142-d, "Amortization and
Impairment of Acquired Renewable Intangible Assets." The Board decided to
discontinue consideration of the issue and removed the project from the
Board’s agenda.
Business
combinations: applying the acquisition method. The Board continued
its redeliberations of the June 2005 FASB Exposure Draft, Business
Combinations. The Board focused on an approach for making exceptions
to the recognition and fair value measurement principles that it affirmed
in past meetings. The Board made the following decisions:
Assets Held for Sale
- The Exposure Draft proposed an exception to the fair value
measurement principle for assets held for sale (it proposed that those
assets be measured at fair value less cost to sell). The Board decided
instead that those assets should be measured at fair value and decided
to amend FASB Statement No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, to replace "fair value less cost to
sell" with "fair value."
- The Board also decided to amend Statement 144 to eliminate the
special guidance for determining whether an acquired asset meets the
held-for-sale criteria (that guidance, contained in paragraph 32 of
Statement 144, allowed the acquirer to classify a long-lived asset as
held for sale if it was probable that the acquirer could meet the
recognition criteria within three months of the acquisition
date). Thus, the Board decided that an acquirer would have to meet
all of the recognition criteria at the acquisition date to
classify a long-lived asset as held for sale at that date.
Employee Benefit Obligations
- The Exposure Draft proposed an exception to the fair value
measurement principle for obligations associated with defined benefit
postretirement benefit plans. The Board affirmed that exception and also
extended it to all employee benefit obligations (except for obligations
associated with share-based payment arrangements, which the Board plans
to consider at a later date). That is, all benefit obligations would be
measured based on guidance in existing standards rather than fair value.
If a standard allows employee benefit obligations to be measured or
recognized in various ways, the acquirer should be required to measure
those assumed obligations in a manner consistent with its existing
accounting policies.
- The Board affirmed the proposed amendments to FASB Statements No.
87, Employers’ Accounting for Pensions, and No. 106,
Employers’ Accounting for Postretirement Benefits Other Than
Pensions, that would require an acquirer to recognize any changes to
the acquiree’s employee benefit plans (such as amendments, curtailments,
or terminations) that it expects to make as postcombination expenses
rather than include such changes in the measurement of the assumed
benefit plan obligations.
- The Board also discussed the measurement of obligations associated
with multiemployer benefit plans assumed in a business combination. It
decided that an acquirer should recognize an expected withdrawal
liability from a multiemployer plan in accordance with the existing
guidance in Statements 87 and 106—that is, if withdrawal from the plan
is probable at the acquisition date.
Operating Leases
- The Board affirmed the implementation guidance proposed in the
Exposure Draft under which an acquirer recognizes the rights and
obligations related to an operating lease in which the acquiree is the
lessee as a net amount rather than as a separate asset and a separate
liability.
- The Board also affirmed the proposed requirement that an acquirer
recognize an intangible asset or a liability if the terms of an acquired
operating lease are favorable or unfavorable relative to market terms at
the acquisition date.
- Several respondents to the Exposure Draft commented that an
operating lease might have value for reasons other than terms that are
favorable relative to market prices—most likely arising from a related
intangible asset. The Board agreed with those respondents and decided
that an acquirer should recognize such intangible assets in the same
manner as other intangible assets acquired in a business combination.
Amendment
of FSP FAS 123(R)-1. The Board decided to issue a proposed FSP to
clarify the classification guidance in FSP FAS 123(R)-1, "Classification
and Measurement of Freestanding Financial Instruments Originally Issued in
Exchange for Employee Services under FASB Statement No. 123(R)," used to
determine whether an entity should reassess the classification of an award
when (1) an individual is no longer employed by the entity and (2) the
entity performs an equity restructuring or business combination. The
proposed FSP would amend FSP FAS 123(R)-1. Specifically, the term
modification as used in that FSP would not include changes to the
terms of the instrument in which (1) either there is no increase in value
to the holders of the instrument or the change in the terms of the award
is not done in contemplation of an equity restructuring or a business
combination and (2) all holders of the same class of equity instruments
are treated in a similar manner.
The Board also decided that:
- The guidance in the FSP should be applied as follows:
- If in applying Statement 123(R) an entity did so in a manner
consistent with the provisions of the FSP, the entity would continue
to apply the provisions in the FSP to prior periods.
- If an entity did not apply Statement 123(R) in a manner consistent
with the provisions of the FSP, the entity would be required to
retrospectively apply the provisions in the FSP to prior periods when
those periods' financial statements are included for comparative
purposes with current period financial statements.
- Early application of the FSP would be permitted in periods for
which financial statements have not yet been issued.
- The comment period would be 30 days.
The Board directed the staff to proceed to a draft of a proposed FSP
for vote by written ballot.
DOCUMENTS AVAILABLE
The following documents were issued on June 8, 2006:
- Proposed
FSP FAS 123(R)-e, "Amendment of FASB Staff Position FAS
123(R)-1." Comments are requested by July 8, 2006.
- Joint FASB and AICPA Invitation to Comment, Enhancing the Financial
Accounting and Reporting Standard-Setting Process for Private
Companies. Comments are requested by August 15, 2006.
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.
Monday, June 19, 2006—a.m., Fair Value Option Roundtable
Meeting
Monday, June 19, 2006—p.m., Liaison Meeting with Financial
Executives International, Stamford, CT
Tuesday, June 20, 2006—FASB
Board Meeting
Tuesday, June 20, 2006—FASB Education
Session
Wednesday, June 21, 2006—Small Business Advisory Council
Meeting
Thursday, June 22, 2006—Financial Accounting Standards Advisory
Council Meeting
Tuesday, June 27, 2006—Postretirement Benefit
Obligations including Pensions Roundtable Meeting
Wednesday, June 28,
2006—FASB Board Meeting
Wednesday, June 28, 2006—FASB Education
Session
Wednesday, July 5, 2006—FASB Board Meeting
Wednesday,
July 5, 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
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