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Action Alert No. 07-49
December 6, 2007
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)
Wednesday, December 12, 2007, 9:00 a.m.
- FASB ratification of EITF consensuses and tentative conclusions (estimated 15-minute discussion). The Board will consider the ratification of the consensuses reached at the November 29, 2007 EITF meeting. (See discussion under EITF ACTIONS.)
- 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 12, 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
No Board meetings were held during the week of November 26, 2007.
EITF ACTIONS
November 29, 2007 EITF Meeting
The Task Force discussed the following issues:
- Issue No. 07-1, "Accounting for Collaborative Arrangements." At the November 29, 2007 EITF meeting, the Task Force affirmed as a consensus the consensus-for-exposure reached at the September 11, 2007 EITF meeting, as amended. The Task Force discussed certain changes to amend the draft abstract to clarify the effect of legal entities on the scope of this Issue and to clarify that the disclosure requirements in the consensus apply to the entire collaborative arrangement, including any portion conducted through a legal entity.
The Task Force agreed to delete from the draft abstract the disclosures in paragraph 19(c), "the stage of the underlying endeavor's life cycle," and in paragraph 19(f), "amounts due from or owed to other participants under the collaborative arrangements."
The Task Force reaffirmed its decision to retain the illustrative examples included as Appendix A to the draft abstract.
The Task Force agreed to change the effective date of the consensus in this Issue to fiscal years beginning after December 15, 2008.
The Task Force decided to change the transition method to a modified version of retrospective transition for only those arrangements in place at the effective date. An entity should report the effects of applying this Issue as a change in accounting principle through retrospective application to all prior periods presented for all arrangements existing as of the effective date.
The Board will consider the ratification of the consensuses in this Issue at its December 12, 2007 meeting.
- Issue No. 07-4, "Application of the Two-Class Method under FASB Statement No. 128 to Master Limited Partnerships." The Task Force decided to revise its consensus-for-exposure reached at the September 11, 2007 EITF meeting on how to allocate current-period earnings to the general partner (GP), limited partners (LPs), and incentive distribution rights (IDR) holders when current-period earnings exceed cash distributions.
The Task Force reached a consensus-for-exposure that when current-period earnings are in excess of cash distributions and the IDRs are a separate LP interest, undistributed earnings should be allocated to the GP, LPs, and IDR holder utilizing the contractual terms of the partnership agreement. The distribution formula for available cash specified in the partnership agreement is how the master limited partnership (MLP) determines the way in which earnings are distributed. Similarly, when the IDR is embedded in the GP interest, undistributed earnings should be allocated to the GP (including the distribution rights of the embedded IDR) and LPs utilizing the distribution formula for available cash specified in the partnership agreement. The undistributed earnings should be allocated to the IDR holder (or the GP with respect to the distribution rights of an embedded IDR) based on the contractual participation rights of the IDR to share in current-period earnings. Therefore, if the partnership agreement includes a “specified threshold” as described in Example F in paragraph 16 of Issue 03-6, an MLP should not allocate undistributed earnings to the IDR holder (or the GP with respect to the distribution rights of an embedded IDR) once the specified threshold has been met. In determining whether a specified threshold exists, an MLP should evaluate whether the IDR holder (or the GP with respect to the distribution rights of an embedded IDR) would be contractually entitled to receive an additional distribution if all earnings for the period were distributed.
In addition, the Task Force decided to revise its consensus-for-exposure on the effective date of this Issue. The Task Force reached a consensus-for-exposure that this Issue should be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Earlier application is not permitted. The guidance in this Issue should be applied retrospectively for all financial statements presented.
The Board will consider the ratification of the consensuses-for-exposure at its December 12, 2007 meeting. If ratified, a draft abstract will be posted to the FASB website for public comment. This Issue will be discussed further at a future meeting.
- Issue No. 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock." The Task Force considered the following two-step approach for determining whether an instrument or embedded feature is indexed to an entity’s own stock:
Step 1: Evaluate the instrument's contingent exercise provisions, if any.
Step 2: Evaluate the instrument's settlement provisions.
Based on the Task Force’s tentative conclusion from the September 11, 2007 EITF meeting, an entity would apply the existing guidance in Issue 01-6 under Step 1. If the evaluation of Step 1 would not preclude an instrument from being considered indexed to the entity's own stock, the entity would proceed to Step 2 and evaluate the instrument's settlement provisions. The following new Issues were developed to address the evaluation of settlement provisions for purposes of determining whether an instrument or embedded feature is indexed to an entity's own stock (Step 2 above).
Issue 1—How an entity should evaluate settlement provisions for purposes of determining whether an instrument or embedded feature is indexed to its own stock.
Issue 2—How an entity should evaluate whether instruments (or embedded features) are indexed to its own stock if (a) the monetary consideration to be exchanged at settlement (that is, the strike price) is not denominated in the entity's functional currency or (b) the shares to be exchanged at settlement are traded only on exchanges (or other established marketplaces) on which trades are not executed in the currency in which the strike price is denominated. This Issue was addressed in proposed Statement 133 Implementation Issue C21, which has been put on hold pending the Task Force's deliberations of this Issue.
Issue 3—Whether an exception to the settlement approach should be developed for purposes of evaluating market-based employee stock option valuation instruments.
The Task Force discussed Issue 1 but was not asked to reach a tentative conclusion. The Task Force asked the FASB staff to conduct further research on alternative views and to solicit additional input from the Working Group for discussion at a future meeting. Issues 2 and 3 were not discussed. This Issue will be discussed further at a future meeting.
- Issue No. 07-6, "Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause." The Task Force affirmed as a consensus the consensus-for-exposure reached at the September 11, 2007 EITF meeting, as amended. The Task Force agreed to make certain changes to amend the draft abstract to remove the example factors from paragraph 8. The Task Force also requested that the objective of this Issue be revised to reflect the removal of the example factors.
The Task Force also decided to modify the transition set forth in the draft abstract to allow entities to consider the guidance in this Issue for assessments of existing transactions, originally accounted for under the deposit, profit-sharing, leasing, or financing methods for reasons other than the existence of a buy-sell clause, that are performed after this Issue's effective date.
The Task Force affirmed that this Issue should be effective for new arrangements entered into and assessments performed in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. Earlier application is not permitted.
The Board will consider the ratification of the consensuses in this Issue at its December 12, 2007 meeting.
FASB DOCUMENTS AVAILABLE
The following documents are available on the FASB website:
FASB Statement No. 141 (revised 2007), Business Combinations (December 2007).
FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (December 2007).
FASB Preliminary Views, Financial Instruments with Characteristics of Equity (November 30, 2007). Comments are requested by May 30, 2008.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through January. 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, December 17, 2007—FASB Education Session
Wednesday, December 19, 2007—FASB Board Meeting
Wednesday, December 19, 2007—FASB Education Session
Thursday, December 20, 2007—FASB Board Meeting
Friday, January 4, 2008—FASB Board Meeting
Friday, January 4, 2008—FASB Education Session
Wednesday, January 9, 2008—FASB Board Meeting
Wednesday, January 9, 2008—FASB Education Session
Wednesday, January 16, 2008—FASB Board Meeting
Wednesday, January 16, 2008—FASB Education Session
Wednesday, January 23, 2008—FASB Board Meeting
Wednesday, January 23, 2008—FASB Education Session
Friday, January 25, 2008—Liaison Meeting with National Association of Real Estate Investment Trusts
Wednesday, January 30, 2008—FASB Board Meeting
Wednesday, January 30, 2008—FASB Education Session
†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.
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