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 4, 2009 Board Meeting

Statement 140: transfers of financial assets. The Board redeliberated significant issues related to the proposed amendment to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

The Board decided that a transferor should not account for the transfer of a financial asset as a sale if the transferor retains effective control over all or a portion of the transferred financial asset or group of financial assets being evaluated for derecognition as a single unit.

The Board decided to amend Statement 140 to require that the application of paragraphs 9(b) and 9(c) consider the transferor’s relationship with the transferred financial asset and any involvements with beneficial interest holders in securitized financial assets.  

The Board decided that a transferor must record a portion of a transferred financial asset as a purchase in certain cases when a subsequent change to the portion causes the transferred portion to no longer meet the criteria of a participating interest (as described in paragraph 55 of Statement 140).

The Board decided that when a transfer of a financial asset in its entirety meets the criteria for sale accounting, a transferor should include as sale proceeds its beneficial interest in the transferred financial assets (if any) at fair value as of the transfer date.

The Board decided that when accounting for a transfer of financial assets that does not qualify for sale accounting, a transferor should not reclassify or remeasure the interests (including security interests) it receives in the transferred financial assets.

Statement 133 implementation issue: embedded credit derivatives scope exception. The Board redeliberated significant issues raised in comments received on proposed Statement 133 Implementation Issue No. C22, “Exception Related to Embedded Credit Derivatives.” That proposed Implementation Issue addresses the scope exception in paragraph 14B of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which indicates that the concentration of credit risk that is only in the form of subordination of one financial instrument to another shall not be considered an embedded derivative feature that is subject to the application of paragraphs 12 and 14A of Statement 133. The Board agreed to proceed with the issuance of final Implementation Issue C22, subject to a few modifications.

The Board decided that paragraph 14B should further state that if, under the terms of the securitized financial instruments, the holder of an interest in a tranche of those securitized financial instruments is exposed to the possibility (however remote) of being required to make potential future payments, then any concentration of credit risk for that tranche could not be considered to be only in the form of subordination of one financial instrument to another. In addition, the Board decided to indicate that while the scope exception does not apply to the interests in tranches that are exposed to potential future payments, it could apply to other tranches that are not exposed to potential future payments. Further, the Board decided to amend paragraph 14B of Statement 133 to indicate that an interest in single-tranche securitized instruments should be subject to the application of paragraphs 12, 13, and 14A Statement 133 for potential bifurcation.

The Board affirmed that the first sentence in paragraph 14B of Statement 133 should be deleted by the Implementation Issue. The Board also decided to make clarifying modifications to Examples 36, 38, 39, and 40 in the Implementation Issue.

The Board decided that the Implementation Issue will be effective the first day of each reporting entity’s first fiscal quarter beginning after March 15, 2009.

The Board affirmed that the objective of this Implementation Issue was to clarify an issue with U.S. generally accepted accounting principles (GAAP) and not to achieve convergence with international financial reporting standards ( IFRS). The Board had previously decided, in December 2008, to address differences between GAAP and IFRS for all financial instruments, including derivatives, as part of the comprehensive joint financial instruments project with the IASB.

The Board directed the staff to proceed to a draft of the final Implementation Issue for vote by written ballot.