SUMMARY OF BOARD DECISIONS

Summary of Board decisions 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 standard.

March 16, 2009 Board Meeting

Financial instruments with characteristics of equity. The Board continued to discuss an approach for determining whether a financial instrument should be classified as equity. The Board decided that a perpetual instrument should be classified as equity. A perpetual instrument is defined as one that lacks a settlement requirement and entitles the holder to a portion of the net assets of the entity in liquidation. Instruments that are redeemable at the option of the issuer meet that definition because although the issuer may choose to settle the instrument, it cannot be required to do so.

The Board also decided that puttable and mandatorily redeemable instruments are of the following two types, which should be considered differently in determining classification:

  1. An instrument that is puttable or mandatorily redeemable upon death or retirement of the holder would be classified as equity. The term retirement was used broadly to include events such as termination, resignation, or ceasing to be a member in a cooperative or partnership.

  2. An instrument that is puttable at the option of the holder or mandatorily redeemable if specified dates or events other than death or retirement occur would generally be classified as liabilities.

Some Board members expressed reservations about always classifying all instruments of the second type as liabilities and indicated that they may want to make exceptions when the approach is more fully developed. One example might be an instrument that is puttable or redeemable at fair value or an approximation thereof.

Fair value measurement. [This summary of decisions will be posted as soon as it is available.]