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.

June 8, 2011 FASB Board Meeting

Revenue recognition. The Board discussed the following topics:

1. Alternative revenue programs for rate-regulated entities
    
2. Disclosure requirements for nonpublic entities.

Alternative Revenue Programs for Rate-Regulated Entities

The Board discussed whether certain rate-regulated activities should be within the scope of the revenue recognition standard. The Board decided to retain the existing guidance in Topic 980 for the recognition of regulatory assets and liabilities from alternative revenue programs and to require that an entity present revenue arising from those assets and liabilities separately from revenues arising from contracts with customers on the face of the statement of comprehensive income.

Disclosure Requirements for Nonpublic Entities

The Board discussed whether nonpublic entities should be exempt from some of the proposed disclosure requirements in the revenue recognition standard.

The Board decided that a nonpublic entity should:

1. Disaggregate revenue between (a) goods or services transferred to customers at a point in time and (b) goods or services transferred to customers over time, and
    
2. Disclose qualitative information about how economic factors (such as type of customer, geographical location of customers, and type of contract) affect the amount, timing, and uncertainty of revenue and cash flows.

The Board decided that a nonpublic entity would not be required to provide the following disclosures:

1. A reconciliation from the opening to the closing balances of:
    
   1. Contract assets and contract liabilities
       
   2. The liability recognized for onerous contracts, and
       
   3. The carrying amount of an asset arising from the costs to acquire or fulfill a contract with a customer.
       
2. The amount of the transaction price allocated to remaining performance obligations and the expected timing of their satisfaction.

The Board decided that required disclosures about the judgments, and changes in judgments, made in applying the requirements that significantly affect the determination of the amount and timing of revenue from contracts with customers should apply to nonpublic entities, except for:

1. The judgments, and changes in judgments, used in determining:
    
   1. The timing of satisfaction of performance obligations, and
       
   2. The transaction price and allocating it to performance obligations.
       
2. Information about the methods, inputs, and assumptions used to:
    
   1. Determine the transaction price in accordance with the proposed requirements,
       
   2. Estimate standalone selling prices of promised goods or services,
       
   3. Measure obligations for returns, refunds, and other similar obligations, and
       
   4. Measure the amount of any liability recognized for onerous performance obligations (including information about the discount rate).

Accounting for financial instruments: classification and measurement.

Initial Measurement

The Board decided that the initial measurement principle should depend upon the subsequent classification and measurement of a financial instrument. The Board decided that financial instruments subsequently classified as fair value with all changes in fair value recognized in net income (FV-NI) would be initially measured at fair value. Financial instruments subsequently classified as fair value with fair value changes in other comprehensive income or amortized cost would be initially measured at transaction price.

The Board decided that entities that follow specialized industry guidance in Topic 946 on investment companies should continue to initially measure their financial instruments at transaction price.

For financial instruments that are not measured at FV-NI, the Board decided to develop a principle that would require an entity to evaluate whether the consideration given or received at initial recognition indicates that another element exists other than the financial instrument.

Fair Value Option

The Board discussed whether a fair value option should be provided for financial liabilities. The Board rejected an alternative to provide an unconditional fair value option for financial liabilities. However, the Board decided to provide a conditional fair value option for hybrid financial liabilities allowing an entity to avoid bifurcation and measure the entire hybrid financial liability at fair value after the entity has determined that an embedded derivative feature that would otherwise require bifurcation and separate accounting exists. The Board will decide at a future meeting whether such a conditional fair value option should also be provided for hybrid financial assets.

The Board also decided that in circumstances in which financial assets will be used to settle nonrecourse financial liabilities, an entity should measure those financial liabilities in accordance with the measurement of the associated financial assets.

The Board directed the staff to evaluate whether a fair value option should be provided for circumstances in which a group of financial assets and financial liabilities are managed together and their performance is evaluated on a fair value basis in accordance with a risk management strategy. The Board also requested the staff to evaluate whether fair value measurement should be required in those circumstances rather than providing a fair value option.