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 an Accounting Standards Update.

December 1, 2010 FASB Board Meeting

Deferral of troubled debt restructuring disclosures. The Acting FASB Chairman announced that a project had been added to the agenda to reconsider the effective date for required disclosures about troubled debt restructurings, as described in Accounting Standards Update No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.

The Board decided to propose a change to the effective date of those disclosures to make it concurrent with the effective date of proposed guidance for identifying a troubled debt restructuring. The Board published an Exposure Draft of proposed clarifications to the guidance used to identify a troubled debt restructuring in October 2010 and expects to publish a final Accounting Standards Update in the first quarter of 2011.

The Board directed the staff to draft an Exposure Draft of a proposed Accounting Standards Update to change the effective date of the troubled debt restructuring disclosures for vote by written ballot. The Exposure Draft will have a 15-day comment period.

The Board decided that the deferral would be effective upon issuance of a final Update.

FASB ratification of EITF consensuses and tentative conclusions.  The Board approved the issuance of four final Accounting Standards Updates to reflect the following consensuses reached at the November 19, 2010 EITF meeting. 
  1. Issue 09-H, "Health Care Entities: Presentation and Disclosure of Net Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts"

    A health care entity is required to present the provision for bad debts as a component of net revenues within the revenue section of the statement of operations. A health care entity is required to disclose the following by major payor sources of revenue:

    1. Its policy for considering collectability in the timing and amount of revenue and bad debt recognized
    2. Patient service revenue (net of contractual allowances and discounts) before any provision for bad debts
    3. A tabular reconciliation, describing the material activity in the allowance for doubtful accounts for the period.
       
    Public entities will be required to provide the new disclosures and statement of operations presentation in fiscal years beginning after December 15, 2010, and interim periods within those years, with early adoption permitted. Nonpublic entities will be required to provide the new disclosures and statement of operations presentation in fiscal years beginning after December 15, 2011, with early adoption permitted. The requirement to report the provision for bad debts as a component of net revenue will be applied retrospectively for all periods presented, while the new disclosure requirements will be applied prospectively.
     
  2. Issue 10-A, "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts"

    When a reporting unit has a zero or negative carrying amount, Step 2 of the goodwill impairment test will be performed if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The qualitative factors to be considered are consistent with the current interim impairment triggers for goodwill.

    Public entities will be required to apply the new requirements in fiscal years beginning after December 15, 2010. Nonpublic entities will be required to apply the new requirements one year later, in fiscal years ending after December 15, 2011, but will have the option of adopting the requirements using the public entity timeline.

    Upon adoption, an entity will perform Step 2 of the goodwill impairment test if it is more likely than not that goodwill is impaired. Furthermore, any impairment identified at the time of adoption will be recognized as a cumulative-effect adjustment to beginning retained earnings.

     
  3. Issue 10-D, "Fees Paid to the Federal Government by Pharmaceutical Manufacturers"

    On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). In addition, the President signed into law the Health Care and Education Reconciliation Act, which includes a number of changes to the PPACA (in combination, the "Acts") on March 30, 2010.

    Pharmaceutical manufacturers will classify the annual fee paid under the Acts as an operating expense. The liability for the fee shall be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. Both public and private entities will be required to apply the new guidance in fiscal years beginning after December 31, 2010, and interim periods within those years.

     
  4. Issue 10-G, "Disclosure of Supplementary Pro Forma Information for Business Combinations"

    A public entity that presents comparative financial statements will disclose revenue and earnings of the combined entity as though the acquisition(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. As part of the supplemental pro forma disclosures required under Topic 805, Business Combinations, an entity will also be required to describe the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination.

    All public entities will be required to apply the new requirements prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted.
     
The Board approved the issuance of an Exposure Draft to solicit comments on the following tentative conclusions reached by the EITF at its November 19, 2010 meeting. The comment period for the Exposure Draft is 120 days.
  1. Issue 10-H, "Fees Paid to the Federal Government by Health Insurers"

    On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). In addition, the President signed into law the Health Care and Education Reconciliation Act, which includes a number of changes to the PPACA (in combination, the "Acts") on March 30, 2010.

    Health insurers would be required to present the annual fee under the Acts as an operating expense. The liability for the fee would be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The proposed new requirements would be effective for all entities in fiscal years beginning after December 31, 2013, and interim periods within those years. 
The Acting FASB Chairman publicly announced that Issue 10-F, “Accounting for Legal Costs Associated with Medical Malpractice and Similar Claims,” has been removed from the EITF agenda per the recommendation of the Task Force at the November 19, 2010 EITF meeting.

Investment properties. The Board tentatively decided that the investment properties guidance would apply to an entity that meets all of the following criteria:
  1. Nature of Investment Activities. The entity’s substantive activities relate to investing in real estate properties for capital appreciation.
  2. Business Purpose. The express business purpose of the entity is investing in real estate for capital appreciation, and the entity has identified potential exit strategies, for example, a defined time (or range of dates) or event at which it expects to exit the investments.
  3. Unit Ownership. Ownership in the entity is represented by units of investments, such as shares or partnership interests, to which proportionate shares of net assets can be attributed.
  4. Pooling of Funds. The entity has unrelated investors that hold significant ownership interests in the entity.
  5. Reporting Entity. The entity can be but does not need to be a legal entity.
The Board asked the staff to clarify some aspects of the criteria during the drafting process.

Risks and uncertainties (formerly going concern). The Board decided that management would update its assessment of the entity’s ability to meet its obligations as they become due if a subsequent event that significantly affects management’s assessment occurs before the financial statements are issued, or are available to be issued. The time horizon for the reassessment would be extended to include the foreseeable future beginning as of the date of the subsequent event. The determination of whether the related disclosures are required would be based on that updated assessment. The entity would still be required to apply the guidance in Topic 855, Subsequent Events, for recognition and disclosure of specified subsequent events.

The Board also decided to revise the definition of imminent to include a requirement that liquidation is imminent when significant management decisions are limited to those necessary to carry out the plan of liquidation, with other decision making being relatively insignificant.