Action Alert No. 07-50
December 14, 2007

NOTICE OF MEETINGS

OPEN BOARD MEETINGS
(Board meetings are available by audio webcast and telephone.)

Wednesday, December 19, 2007, 8:00 a.m.

The Board meeting will begin at 8:00 a.m. instead of 9:00 a.m.

1. Agenda decision: intangible assets (estimated 45-minute discussion). Consistent with the February 2006 Memorandum of Understanding, the Board will discuss whether to add a project to its agenda to address the accounting and reporting for intangible assets. The Board will consider the scope of the proposed project and whether the project, if undertaken, should be conducted collaboratively with the IASB.

2. Conceptual framework: elements and recognition (estimated 45-minute discussion). The Board will continue its discussions of the elements of financial statements, focusing on the definition of a liability.

3. Accounting for depreciable assets classified as held-for-sale when an equity method investment is obtained (estimated 30-minute discussion). The Board will discuss issues raised by respondents to proposed FSP 144-c, Classifying and Accounting for a Depreciable Asset as Held-for-Sale When an Equity Method Investment Is Obtained. The Board also will discuss whether to issue the FSP as final.

4. 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.

Thursday, December 20, 2007, 8:00 a.m.

The Board meeting will begin at 8:00 a.m. instead of 9:00 a.m.

1. Statement 133 hedging (estimated 90-minute discussion). The Board will discuss (a) the fair value hedging approach in the context of foreign currency hedges, (b) what is meant by dedesignation for cash flow and fair value hedges, (c) how amounts in other comprehensive income would be reclassified to earnings upon dedesignation, termination, and occurrence of the forecasted transaction in cash flow hedging situations, (d) what disclosures would be required, and (e) effective date and transition.

2. Statement 133 Implementation Issue—clarification of the application of the shortcut method (estimated 45-minute discussion). The Board will discuss whether to issue final guidance on proposed Statement 133 Implementation Issue No. E23, "Issues Involving the Application of the Shortcut Method under Paragraph 68," and if so, begin redeliberations of issues raised in the comment letters. Issues to be discussed include applying the shortcut method to:
   1. Swaps that have a non-zero fair value at inception, as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by FASB Statement No. 157, Fair Value Measurements, is solely attributable to a bid-ask spread (paragraph 68(b))
   2. Hedging relationships beginning after the inception of the hedged item ("late hedging") (paragraph 68(e))
   3. Hedged items that have a settlement date subsequent to the swap trade date (paragraph 68(b))
   4. Hedged items that are subject to principal pay-downs prior to maturity (paragraph 68(a))
   5. Swaps and hedged items that are (1) typical and (2) do not invalidate the assumption of no ineffectiveness (paragraph 68(e))
   6. Hedged items with discounts or premiums at inception of the hedging relationship attributable solely to the market convention of rounding the coupon rate (paragraph 68(e))
   7. Hedged items that are zero-coupon financial instruments (paragraph 68(e)).

   The Board also will discuss possible transition guidance to be provided upon issuance of Implementation Issue E23.

3. 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, December 19, 2007, following the Board meeting

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 sessions.

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, FSP, or Statement 133 Implementation Issue.

December 5, 2007 Board Meeting

Income taxes. The Board discussed remaining issues in its short-term convergence project on income taxes that it is conducting jointly with the IASB. The Board made the following decisions:

1. FASB Statement No. 109, Accounting for Income Taxes, would be amended to include a definition of the term tax basis. The IASB plans to consider amending IAS 12, Income Taxes, to include a consistent definition.

2. The existing Statement 109 guidance about the realizability of deferred tax assets would be retained. The Board acknowledged the IASB’s tentative decision to amend IAS 12 to converge to Statement 109’s valuation allowance approach but to describe that approach differently. The Board directed the staff to include in the basis for conclusions of the Exposure Draft the Boards’ conclusion that the financial reporting results of the two standards should be the same even though the guidance is phrased differently.

3. Paragraph 28 of Statement 109 would be amended to explicitly include current tax consequences of a change in an entity’s tax status. This amendment would result in guidance consistent with SIC Interpretation 25, Income Taxes—Changes in the Tax Status of an Entity or its Shareholders. The Board directed the staff to note in the basis for conclusions its belief that the proposed amendment would not change the application of Statement 109.

4. Statement 109 would be amended to require the use of the tax rate applicable to distributed earnings if the entity intends to distribute income to owners and it has the ability to do so; in all other cases use of the rate applicable to undistributed earnings would be required. The Board had previously decided to require use of the undistributed rate in all cases (unless an obligation to distribute exists). The Board decided to change that decision to address a variety of application issues it raised.

5. An entity would be required to adopt the standard through a cumulative catch-up of retained earnings as of the beginning of the year in which the final Statement is adopted, except as it relates to the decision affecting the allocation of the purchase price in asset acquisitions with tax basis differences. The guidance for that decision would apply prospectively to transactions entered into after the effective date.

6. An entity would be required to adopt the proposed Statement in the first fiscal year beginning after December 15, 2009. Early adoption would be prohibited.

7. The Board also directed the staff to begin drafting an Exposure Draft of a proposed Statement for vote by written ballot that provides a 120-day comment period. The Board expects that proposed Statement will be ready for publication early in the second quarter of 2008.

Derivative disclosures. The Board completed its redeliberations of the Exposure Draft, Disclosures about Derivative Instruments and Hedging Activities, as follows:

1. Contingent features in derivative agreements. The Board decided to require a quantitative disclosure about the potential cash outflows an entity would be required to make upon the triggering of credit-related contingent features.

2. Notional amounts and leverage factors. The Board decided to require an entity to provide general information about its level of derivative activity.

3. Frequency of disclosures. The Board decided to require the proposed disclosures for both interim and annual reporting periods.

4. Alternative disclosures for trading derivatives. The Board decided to require that an entity provide information in tabular format about (a) the location and fair value amounts of derivative instruments reported in the statement of financial position (balance sheet table) and (b) the location and amount of gains and losses on derivative instruments reported in the statement of financial performance (income statement table). The Board decided to permit an entity an option to forgo completing certain portions of the above two tables for derivatives included in an entity’s trading activities and not designated as hedging instruments under Statement 133. In place of not completing certain portions of the above two tables, an entity would be required to provide, in tabular format, fair value and gain and loss information about all instruments included in its trading activities.

5. Tabular disclosure of cumulative adjustments to hedged items in fair value hedges. The Board decided to address the impact of adjusting the carrying amount of hedged items in its hedging project on Statement 133.

6. Qualitative disclosures that are currently encouraged by paragraph 44 of Statement 133. The Board decided not to require the disclosures currently encouraged in paragraph 44 of Statement 133. However, the Board directed the staff to clarify, in the drafting of paragraph 44 of the final Statement that the encouraged disclosure should focus on an entity’s market risks and strategies to manage those risks.

7. Effective date and transition. The Board decided that the final Statement should be effective for fiscal periods beginning after November 15, 2008, and should be applied on a prospective basis.

The Board authorized the staff to proceed to a draft of a final Statement for vote by written ballot.

FUTURE OPEN MEETINGS

The following is a list of open meetings tentatively scheduled through February. 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.

^†FASB Meetings Available by Audio Webcast and Telephone

To monitor available live meetings free of charge by audio webcast, access the link http://www.trz.cc/fasb/live.html. To monitor by telephone, call 1-800-846-4717. You will be charged $.45 per minute, and VISA, MasterCard, American Express, or Discover Card is required. To listen to a recording of the most recent Board meeting via webcast free of charge, access the link http://www.trz.cc/fasb/archive.html. To listen to a recording by telephone, for a charge of $.45 per minute, call 1-800-462-0393. Questions can be directed to 1-800-846-4630.

Handouts distributed to the audience at Board meetings are posted to our website one-half hour before the start of the meeting. A synopsis of each issue to be discussed at EITF meetings also is posted to this website.

Education sessions are not available by audio webcast or telephone, and no handouts are distributed to the audience.