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.

November 30, 2011 FASB Board Meeting 

Insurance contracts. The FASB continued its discussions on insurance contracts by considering the measurement of cash flows of insurance contracts that contractually depend wholly or partly on the performance of other assets or liabilities of the insurer or on the performance of the insurer itself.

Accounting for Participation Features

The FASB tentatively decided the following, as it relates to the measurement of insurance contract fulfillment cash flows and to the measurement of the obligation from any nondiscretionary performance-linked participating features that both contractually depend wholly or partly on the performance of other assets or liabilities recognized on the insurer's statement of financial position, or the performance of the insurer itself, and are a component of an insurance contract's obligations:
  1. The obligation due to the performance-linked participating features should be measured based on an insurer's current liability (that is, the contractual obligation incurred to date) adjusted to eliminate accounting mismatches that reflect timing differences between the current liability and the measurement of the underlying items in the U.S. GAAP/IFRS statement of financial position that are expected to reverse within the boundary of the insurance contract. An underlying item is defined as the asset or liability (or group of assets or liabilities) on which the cash flows resulting from the participation feature depend.
     
  2. Any changes in the liability for the performance-linked participating features should be presented in the same way within the statement of comprehensive income (that is, consistently in net income and/or other comprehensive income) as the changes in the underlying item.
     
  3. No further adjustments to the measurement of the liability for the performance-linked participating features are deemed necessary for the purposes of reflecting expected cash flows.
Next Steps

The FASB and the IASB will continue their joint discussions on insurance contracts in the week of December 12, 2011.



Agenda decision: Application of asset- or entity-based guidance to nonfinancial assets held in an entity. The FASB chairman added a research project to the FASB agenda to explore when a reporting entity should apply asset- or entity-based guidance to nonfinancial assets held in an entity. The results of this research effort will be used by the FASB chairman to decide whether to add a standards-setting project to the agenda.



FASB approval of EITF consensus and consensus-for-exposure. The Board approved the following consensus reached at the November 3, 2011 EITF meeting. The Board expects to publish a final Accounting Standards Update in mid-December.

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 because the subsidiary has defaulted on its nonrecourse debt should use the guidance in Subtopic 360-20 (real estate sales) to determine whether to derecognize the in substance real estate entities.

Entities will apply the new requirements prospectively to deconsolidation events occurring on or after the effective date. Entities should not adjust or revise financial information for prior periods even if they have continuing involvement with previously derecognized in substance real estate.

For public entities, the consensus will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. For nonpublic entities, the consensus will be effective for fiscal years ending after December 15, 2013, and interim and annual periods thereafter. Earlier application is permitted.

The Board also approved the following consensus-for-exposure reached at the November 3, 2011 EITF meeting. The Board expects to publish an Exposure Draft of proposed amendments to the Codification in mid-December with a 60-day comment period.

Issue No. 11-A, "Parent's Accounting for the Cumulative Translation Adjustment upon the Sale or Transfer of a Group of Assets That Is a Nonprofit Activity or a Business within a Consolidated Foreign Entity"

Upon the sale or transfer of a group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a consolidated foreign entity a parent would recognize in earnings a portion of the cumulative translation adjustment (CTA) associated with the disposed asset group. Entities would determine the amount of the CTA to be recognized in earnings in a systematic and rational manner that reflects an asset group's relative portion of the CTA associated with the foreign entity.

The consensus-for-exposure clarifies the guidance for the release of the CTA into earnings upon the loss of a controlling financial interest in a subsidiary (thereby the substance of paragraph B53 of Statement 160, which was not codified, would be added to the Codification). Additionally, the current reference in Subtopic 830-30 to Subtopic 810-10 would be amended to cite the applicable paragraphs within Subtopic 810-10 (as opposed to the entire Subtopic).

The proposed amendments would be applied prospectively for derecognition events occurring after the effective date. Earlier application would be permitted.