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.

July 13, 2011 FASB Board Meeting

Revenue recognition. The Board discussed whether to provide nonpublic entities with an alternative method of applying the transition guidance in the final revenue recognition standard. The Board decided that a nonpublic entity should initially apply the guidance in the proposed Update on revenue recognition on a retrospective basis. The Board acknowledged that nonpublic entities are not required under U.S. GAAP to include comparable periods in their financial statements. However, the Board felt that if a nonpublic entity includes comparable periods in its financial statements, then it is important that revenue be recognized consistently from period to period. The Board noted that nonpublic entities would be afforded certain reliefs including (1) not requiring restatement for contracts that begin and end in the same prior annual accounting period, (2) allowing the use of hindsight in estimating variable consideration, and (3) only requiring the onerous test as of the effective date unless an onerous liability was previously recognized. In addition, the Board expressed its commitment to consider at a future meeting whether the effective date for public entities should be deferred for nonpublic entities.


Leases. The Board discussed lessor accounting for leveraged lease transactions and tentatively decided that:
  1. A lessor would account for leveraged leases under the proposed new leases guidance. There would not be a different lessor approach for leveraged leases.
     
  2. A lessor would apply the same transition guidance to current leveraged leases as required for all other leases; that is, existing leveraged lease transactions would not be grandfathered.

Consolidation: investment companies. At the June 8, 2011 Board meeting, the Board decided that an investment company would be required to consolidate an investment property entity when it holds a controlling financial interest in the investment property entity. At today’s meeting, the Board decided that an investment company should calculate its financial highlights at the consolidated level if the investment company consolidates another entity. However, the financial highlights of the consolidated entity should exclude amounts attributable to the noncontrolling interest holders of the investment property subsidiaries.

The Board also decided that an investment company would be required to calculate an expense ratio that excludes the effects of consolidating an investment property entity.

The Board also decided that noncontrolling interests in a consolidated investment property entity should be presented in accordance with Topic 810 as follows:
  1. The statement of assets and liabilities would reflect the noncontrolling interest separately from the equity held by the parent entity’s investors.
     
  2. The statement of operations would include an allocation of the increase in net assets from operations (net income) between the parent entity’s investors and the noncontrolling interest.
     
  3. The statement of changes in net assets would separately identify changes in net assets that are attributed to the parent entity’s investors and those that are attributed to the noncontrolling interest holders.
The Board decided that the comment period for the proposed Accounting Standard Update would coincide with the end date of the comment period on the IASB’s Exposure Draft on investment entities, which is expected to be 120 days.


FASB ratification of EITF consensuses and tentative conclusions. The Board ratified the following consensuses reached at the June 23, 2011 EITF meeting.
  1. Issue No. 09-H, "Health Care Entities: Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities"

    The scope of this consensus is limited to health care entities that recognize patient service revenue at the time the services are rendered even though the entity does not assess the patient’s ability to pay.

    A health care entity within the scope of this consensus should present the provision for bad debts related to patient service revenue as a deduction from patient service revenue (net of contractual allowances and discounts) in the statement of operations and should disclose all of the following:
     
    1. By major payor sources of revenue:
       
      1. Its policy for assessing the timing and amount of uncollectible revenue recognized as bad debts
      2. Its policy for assessing collectability in determining the timing and amount of revenue (net of contractual allowances and discounts) to be recognized
      3. Its patient service revenue (net of contractual allowances and discounts) before any provision for bad debts.

    2. Quantitative and qualitative information about significant changes in the allowance for doubtful accounts related to patient accounts receivable.
    An entity should identify its major payor sources of revenue consistent with how the entity manages its business (for example, how it assesses credit risk).

    The consensus will be effective for public entities for fiscal years and interim periods within those years beginning after December 15, 2011. The consensus will be effective for nonpublic entities for the first annual period ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted.

    The consensus to present (1) patient service revenue (net of contractual allowances and discounts), (2) the provision for bad debts related to patient service revenue, and (3) the resulting net patient service revenue less the related provision for bad debts as separate line items on the face of the statement of operations should be applied through retrospective application for all periods presented, while the new disclosure requirements should be applied prospectively.
  1. Issue No. 10-H, “Fees Paid to the Federal Government by Health Insurers”

    A health insurer should present the annual fee to be paid under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act as an operating expense. The fee should be recognized over the calendar year in which it is payable using a straight-line method of allocation unless another method better allocates the annual fee over the calendar year that it is payable.

    The consensus does not require any additional recurring disclosures.

    The consensus will be effective for calendar years beginning after December 31, 2013.
The Board also ratified the following consensus-for-exposure reached at the June 23, 2011 EITF meeting. The consensus-for-exposure is expected to be exposed for a period of 75 days.

  1. Issue No. 10-E, “Derecognition of in Substance Real Estate”

    A parent that ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default by the subsidiary on its nonrecourse debt would apply the guidance in Subtopic 360-20, Property, Plant, and Equipment—Real Estate Sales, to determine whether to derecognize the real estate and the related debt in the subsidiary.

    The consensus-for-exposure does not require any additional recurring disclosures.

    The consensus-for-exposure would be applied on a prospective basis to evaluate whether to derecognize real estate owned by an in substance real estate subsidiary. Prior periods would not be adjusted even if the reporting entity has continuing involvement with a previously deconsolidated in substance real estate subsidiary.