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Action Alert No. 08-27
July 3, 2008
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 7, 2008. The next
scheduled Board meeting is Wednesday, July 16, 2008.
OPEN EDUCATION SESSION
Thursday, July 10, 2008, 9:00 a.m.
The education session will be held on Thursday instead of
Wednesday.
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.
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.
June 25, 2008 Board Meeting
Conceptual
framework: elements and recognition. As part of its joint project
with the IASB, the Board considered how to determine when statutes, laws,
and regulations give rise to a liability and how to deal with uncertainty
when ascertaining the existence of a liability.
Statutes, laws, and regulations
The Board noted that an entity may be subject to the requirements of a
statute, law, or regulation, yet a government or other party cannot
enforce those requirements until the entity violates the statute, law, or
regulation or until an event occurs that triggers the requirements. The
Board discussed three examples—an environmental obligation, a statutory
warranty, and a speeding ticket—and decided the following:
- An entity does not have a present unconditional obligation to
comply with a statute that is not yet effective.
- An entity does not have a present unconditional obligation
for future actions it expects or intends to take but cannot be compelled
to take.
- An entity does not have a present unconditional obligation to
transfer economic resources merely because it must comply with the law.
An obligating event must also have occurred.
- An entity has a present unconditional obligation at the reporting
date when the entity violates a requirement or when another obligating
event has occurred.
- An entity has a present unconditional obligation that has an
associated conditional obligation (a stand-ready obligation) when a
statute requires the entity to provide risk protection. That requirement
results in an implicit contractual obligation between the two parties.
- An entity has a present unconditional obligation that has an
associated conditional obligation when the entity separately agrees to
bear another’s risk that arises from being subject to a statute.
Dealing with uncertainties
Uncertainties result from situations where evidence is lacking or facts
are unclear. The Board considered whether to address uncertainties about
whether a liability exists in the guidance accompanying the definition or
in the criteria for recognition. The Board decided to address uncertainty
in the guidance accompanying the definition. The Board decided that if an
entity is uncertain about whether a liability exists, that entity should
make a neutral judgment based on its understanding of the facts and
circumstances at the end of the reporting period. If it is judged that a
liability exists, uncertainty about the amount of the liability would be
taken into account in measurement. The Board also decided that additional
guidance should be developed on how those judgments can be made in a
comparable manner at a standards level.
The Board considered additional situations to evaluate the robustness
of the working definition of a liability. With regard to the proposed
working definition of a liability, the Board directed the staff to
consider revising the definition (1) to include an additional reference
that an economic obligation must be unconditional and (2) to replace the
description that an economic obligation is something that is capable of
resulting in “cash outflows or reduced cash inflows, directly or
indirectly” with “provision of an economic resource.” Also, the Board
agreed with the summary of tentative decisions made to date and its
proposed working definition, including the suggested revisions above, as a
basis for drafting those aspects of the discussion paper on elements and
recognition.
The IASB discussed these issues and proposals about the proposed
working definition of a liability and reached similar conclusions at its
meeting on June 20, 2008.
FASB ratification
of EITF consensuses and tentative conclusions. The Board
considered and ratified the following consensuses reached at the June 12,
2008 EITF meeting:
- Issue No. 07-5, "Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity's Own Stock"
- Issue No. 08-3, "Accounting by Lessees for Nonrefundable Maintenance
Deposits"
- Issue No. 08-4, "Transition Guidance for Conforming Changes to Issue
No. 98-5."
The Board also considered and ratified the consensus-for-exposure
reached at the June 12, 2008 EITF meeting on Issue No. 08-5, "Issuer’s
Accounting for Liabilities Measured at Fair Value with a Third-Party
Credit Enhancement."
The FASB chairman announced the removal of the following issues from
the Task Force’s agenda:
- Issue No. 02-D, “The Effect of Dual-Indexation both to a Company's
Own Stock and to Interest Rates and the Company's Credit Risk in
Evaluating the Exception under Paragraph 11(a)(1) of FASB Statement No.
133, Accounting for Derivative Instruments and Hedging
Activities”
- Issue No. 08-2, “Lessor Revenue Recognition for Maintenance
Services.”
Agenda decision announcement. The FASB chairman announced the
removal from the Board’s agenda of proposed Statement 133 Implementation
Issue No. C21, “Whether Options (Including Embedded Conversion Options)
Are Indexed to both an Entity’s Own Stock and Currency Exchange Rates,”
because that issue was resolved by the consensus in EITF Issue 07-5,
“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity's Own Stock.”
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.
Wednesday, July 16, 2008—FASB Board Meeting
Wednesday, July 16,
2008—FASB Education Session
Wednesday, July 23, 2008—FASB Board
Meeting
Wednesday, July 23, 2008—FASB Education Session
Wednesday,
July 30, 2008—FASB Board Meeting
Wednesday, July 30, 2008—FASB
Education Session
Wednesday, August 6, 2008—FASB Board
Meeting
Wednesday, August 6, 2008—FASB Education Session
Wednesday,
August 13, 2008—FASB Board Meeting
Wednesday, August 13, 2008—FASB
Education Session
Wednesday, August 20, 2008—FASB Board
Meeting
Wednesday, August 20, 2008—FASB Education Session
Wednesday,
August 27, 2008—FASB Board Meeting
Wednesday, August 27, 2008—FASB
Education Session
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