|
Action Alert No. 08-16
April 17, 2008
NOTICE OF MEETINGS
OPEN JOINT FASB/IASB BOARD MEETING
(This joint meeting is
available by audio webcast through the IASB. Visit the IASB website for more
information on webcasting. The audio playback file will be available to
listeners via the IASB website.)
Painters’ Hall
9 Little Trinity Lane
London EC4V 2AD
United
Kingdom
Monday, April 21, 2008, 6:45 a.m. EDT (11:45 a.m. BST)
The FASB and the IASB will meet in London to discuss the following:
- Memorandum of
Understanding. The Boards will discuss the Memorandum of
Understanding between the FASB and IASB, including current priorities.
(Scheduled for 6:45 a.m. – 7:45 a.m. and 8:45 a.m. – 9:30 a.m.
EDT)
- Revenue
recognition. Representatives of the European Financial Reporting
Advisory Group (EFRAG) will present to the Boards an overview of the
PAAinE (Pro-active Accounting Activities in Europe) Discussion Paper,
Revenue Recognition—A European Contribution. (Scheduled for 9:30 a.m.
– 10:45 a.m. EDT)
- Conceptual
framework: objectives and qualitative characteristics and reporting
entity. The Boards will discuss the implications of adopting the
entity perspective—that is, the entity itself is the subject matter of
financial reporting. This issue was discussed in the objectives and
qualitative characteristics phase (Phase A) and the reporting entity
phase (Phase D) of the framework project. The Boards also will consider
whether and, if so, how they might invite comments on potential
implications of decisions reached on those phases for matters that are
being or are yet to be considered in other phases of the project. In
addition, the Boards will discuss a sweep issue arising from Board
members’ comments on a draft discussion paper for Phase D, relating to
parent-only financial statements. (Scheduled for 11:00 a.m. – 1:00
p.m. EDT)
Tuesday, April 22, 2008, 4:00 a.m. EDT (9:00 a.m. BST)
- Meeting of IASB, FASB, and CRUF (Corporate Reporting Users’
Forum). (Scheduled for 4:00 a.m. – 5:00 a.m. EDT)
- FASB and IASB—standard setters' responses to credit crisis.
The Boards will outline and discuss their responses to the current
credit crisis, including identifying how the crisis has affected their
current project plans and priorities. (Scheduled for 5:00 a.m. – 6:30
a.m. EDT)
OPEN EDUCATION SESSION
No education sessions are planned for the week of April 21,
2008.
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.
April 9, 2008 Board Meeting
Revenue
recognition. The Board discussed drafts of Chapters 2, 3, and 4
for the upcoming discussion paper on revenue recognition. These chapters
cover accounting for contracts with customers and the identification and
satisfaction of performance obligations. The Board was not asked to make
any decisions. Instead, the Board offered suggestions for improving the
draft chapters of the discussion paper.
In particular, the Board asked the staff to consider how the proposed
revenue recognition model could be articulated based on the existing
definition of an asset, rather than the Boards' working definition from
the conceptual framework project. The Board also asked the staff to
explain the alternative view held by some Board members that revenue
cannot arise at contract inception. In general, the Board agreed with the
staff's approach in the upcoming revenue recognition discussion paper.
Measurement
of liabilities. The Board discussed comments received on proposed
FSP FAS 157-c, Measuring Liabilities under FASB Statement No. 157,
and directed the staff to make the following changes to the proposed FSP
and its related amendments to clarify the Board’s intent:
- Modify paragraph 6 of the proposed FSP to clarify that the
exceptions to the use of Level 1 inputs in paragraphs 25 and 26 of FASB
Statement No. 157, Fair Value Measurements, continue to be
available under the guidance in the proposed FSP
- Clarify that when using a quoted price in an active market, an
entity should ensure that the item for which the quote pertains is
identical to the unit of account for the liability being measured
- Modify paragraph 6 of the proposed FSP to clarify that the best
measurement of fair value for an entity’s liability is the price at
which that liability is traded as an asset
- Clarify that the intent of the measurement guidance in paragraph 7
of the proposed FSP is to be a starting point for the fair value
measurement of a liability and that any amounts calculated under that
guidance may need to be adjusted further to remain consistent with the
principles of Statement 157
- Clarify that the effect of initially applying the guidance in the
proposed FSP should be included as a change in fair value in the period
of adoption
- Specify that the final FSP will be effective at the later of (a) the
beginning of the first reporting period ending after the issuance date
of the FSP or (b) the beginning of the period in which an entity
initially applies Statement 157.
The Board directed the staff to present a memorandum to the Board to
ensure that the staff has captured the Board’s views on the FSP. The Board
may decide to readdress issues related to this FSP at a future meeting.
The Board directed the staff to proceed to a draft of a final FSP for vote
by written ballot after it has reviewed the staff memorandum.
Reconsideration of Interpretation 46(R). The Board discussed
amending certain key provisions of FASB Interpretation No. 46 (revised
December 2003), Consolidation of Variable Interest Entities,
primarily as a result of the potential elimination of the qualifying
special-purpose entity concept in FASB Statement No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, and in Interpretation 46(R) along with the recent
activities in the credit markets. The Board supported requiring an
enterprise (including its related party and de facto agents) to determine
whether it is the enterprise that must consolidate a variable interest
entity (the primary beneficiary) primarily through a thorough
qualitative assessment. If an enterprise is unable to determine if a
primary beneficiary exists (or does not exist) through the qualitative
assessment, the enterprise would perform the current quantitative analysis
described in Interpretation 46(R) (that is, determining the primary
beneficiary based on which enterprise quantitatively absorbs the majority
of the expected losses, receives the majority of the residual returns, or
both).
The Board also approved the addition of the “passive interest” concept.
A passive interest is an interest in a variable interest entity:
- That has a maximum exposure that is capped (it cannot exceed an
amount determinable at the date of the enterprise’s involvement with the
entity)
- In which the enterprise (including related parties and de facto
agents) with the interest has no involvement with the design or redesign
of the variable interest entity
- In which the enterprise has no additional involvement or interests
with the variable interest entity
- In which the interest does not give the entity significant control
rights (guidance and factors are within the qualitative assessment
guidance)
- In which the interest is insignificant. (The Board agreed that the
guidance for insignificant interests would be established at a later
date.)
The Board agreed that an enterprise with a passive interest would not
be considered the primary beneficiary in any circumstance when the
interest is passive.
In supporting the addition and the emphasis on a qualitative
assessment, the Board requested that the staff establish an overall
objective of the qualitative analysis and suggested criteria supporting
that objective that can be easily understood and applied by constituents.
The Board agreed that the criteria would not be considered all-inclusive
and that constituents would have to apply professional judgment.
The Board agreed to rescind the current guidance for reconsidering when
an entity is a variable interest entity and which enterprise, if any, with
a variable interest in a variable interest entity should consolidate the
entity as provided in paragraphs 7 and 15 of Interpretation 46(R). The
Board agreed that the reconsideration of the status of an entity and the
primary beneficiary should be made during each reporting period using the
amended guidance requiring that the primary assessment be based on a
qualitative analysis.
Finally, the Board agreed to rescind the exemption from reconsideration
of an entity in a variable interest entity in paragraph 7 of
Interpretation 46(R) for troubled debt restructurings.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
May. 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.
Wednesday, April 30, 2008—FASB Board Meeting
Wednesday, April 30,
2008—FASB Education Session
Tuesday, May 6, 2008—FASB Insurance
Forum
Wednesday, May 7, 2008—FASB Board Meeting
Wednesday, May 7,
2008—FASB Education Session
Wednesday, May 14, 2008—FASB Board
Meeting
Wednesday, May 14, 2008—FASB Education Session
Wednesday,
May 21, 2008—FASB Board Meeting
Wednesday, May 21, 2008—FASB Education
Session
Thursday, May 22, 2008—Liaison Meeting with Healthcare
Financial Management Association
Wednesday, May 28, 2008—FASB Education
Session
|
|