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.

October 14, 2009 Board Meeting

Accounting for financial instruments.The Board discussed the recognition and initial measurement of financial instruments.
  1. The Board decided on the following recognition principle for financial instruments:
    An entity shall recognize all of its financial instruments in its statement of financial position as either financial assets or financial liabilities depending on the entity’s present rights or obligations in the contracts.

    The Board also decided to amend the existing definition of a financial instrument in the Master Glossary of the FASB Accounting Standards Codification™ to align with the recognition principle.

  2. The Board decided that an entity would measure a financial instrument at initial recognition as follows:
     
    1. A financial instrument measured at fair value with changes in fair value recognized in net income would be initially measured at fair value. A difference between the transaction price and that fair value, if any, would be immediately recognized as a gain or loss in net income.
    2. A financial instrument measured at fair value with changes in fair value recognized in other comprehensive income and financial instruments measured at amortized cost would be initially measured at transaction price. For a financial instrument measured at fair value with changes in fair value recognized in other comprehensive income, the difference between transaction price and fair value upon the first remeasurement would be recognized in other comprehensive income.
       
  3. The Board decided that an entity would account for transaction costs and fees arising from the purchase or sale of a financial instrument as follows:
     
    1. For a financial instrument measured at fair value with changes in fair value recognized in net income, transaction costs and fees would be recognized in net income immediately at inception of the transaction.
    2. For a financial instrument measured at fair value with changes in fair value recognized in other comprehensive income, transaction costs and fees would be deferred in other comprehensive income and recognized as a yield adjustment over the life of the related financial instrument.

Financial statement presentation. The Board continued deliberating the proposals in the October 2008 Discussion Paper, Preliminary Views on Financial Statement Presentation, making the tentative decisions described below:
  1. For each item in the other comprehensive income section (with the exception of a foreign currency translation adjustment on a consolidated subsidiary) an entity should identify and indicate on the statement of comprehensive income the category or section to which the item relates, as proposed in the Discussion Paper.
  2. An entity should apply existing requirements for allocating and presenting income taxes in the statement of comprehensive income, including the requirement that an entity present components of other comprehensive income either net of related tax effects or before related tax effects, as proposed in the Discussion Paper.
  3. An entity should disclose the amount of income tax allocated to each component of other comprehensive income, as is required under current U.S. generally accepted accounting principles (GAAP).
  4. An entity should present current and deferred income tax assets and liabilities recognized in accordance with U.S. GAAP and related cash flows in an income tax section on the statement of financial position and the statement of cash flows, as proposed in the Discussion Paper.

Disclosures about credit quality and the allowance for credit losses. The Board discussed a summary of the comments received on the June 2009 Exposure Draft, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, and its plan for redeliberations.

The Board decided to move forward with its plans to enhance disclosures about credit quality and the allowance for credit losses independently from its broad project on accounting for financial instruments. Before finalizing those disclosure enhancements, the Board will consider developments in the broader project to minimize the risk that the disclosures will become outdated soon after implementation.


Agenda decisions. The FASB chairman announced the following agenda decisions:
  1. Treatment of base jackpot liabilities of casinos—this project was removed from the Board’s agenda and added to the Emerging Issues Task Force's agenda.
  2. Deferred tax assets and liabilities on available-for-sale debt securities that are expected to be held to recovery—this project was removed from the Board’s agenda because the issues will be addressed within the Board’s project on accounting for financial instruments.