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.

September 7, 2011 FASB Board Meeting

1. If the variability of the cash flows of a specified uncertain future event is primarily due to timing of that event, an insurer is released from risk on the basis of reduced uncertainty in the timing of the specified event.
    
2. If the variability of the cash flows of a specified uncertain future event is primarily due to the frequency and severity of that event, an insurer is released from risk as variability in the cash flows is reduced as information about expected cash flows becomes more known throughout the life cycle of the contract.

1. An insurer should consider specific facts and circumstances to qualitatively determine if a reduction in the variability of cash flows has occurred to the extent an insurer is released from risk. Those facts and circumstances should include the following:
    
   1. The entity’s relative experience with the types of contracts
       
   2. The entity’s past experience in estimating expected cash flows
       
   3. Inherent difficulties in estimating expected cash flows
       
   4. The relative homogeneity of the portfolio and within the portfolio
       
   5. Past experience not being representative of future results.
       
2. A reduction in the variability of the cash flows such that an insurer is released from risk is a matter of judgment and should be based on facts and circumstances unique to the entity and the nature of the insurance contracts. Different insurers may define a reduction in variability of cash flows in different ways, as further information is obtained about the expected cash flows during the life cycle of an insurance portfolio. The points in the life cycle that should be considered for examination and assessment, among other points in the life cycle, include the following:
    
   1. When an insurer incurs a claim but that claim has not yet been reported
       
   2. When a claim has been reported
       
   3. As additional information becomes known
       
   4. The point at which the parties to the contract have agreed upon a settlement amount
       
   5. The point at which the claim has been paid.
       
3. An insurer should disclose the methodology used to calculate the profit realization of the single margin.

1. The scope for the proposed disclosures about liquidity risk would include all entities, but only financial institutions would provide disclosures about interest rate risk.
    
2. Financial institutions would include banks, savings and loan associations, savings banks, credit unions, finance companies, and insurance entities. The term financial institutions is described in paragraph 942-320-50-1 of the FASB Accounting Standards Codification®.
    
3. The disclosures applicable to financial institutions would be applicable to reportable segments of entities, for example, those reportable segments that engage in transactions that involve lending to or financing the activities of others. The term reportable segment is described in Section 280-10-50 of the Codification.

1. The exposure to risks and how they arise
    
2. Its objectives, policies, and processes for managing the risks and the methods used to measure the risks
    
3. Any changes in item (1) or (2) from the previous period and the reasons for the changes.

1. All entities would provide disclosure about their available liquid funds, which includes unencumbered cash and high-quality liquid assets, and borrowing availability such as lines of credit. This disclosure would include a discussion about the effect of regulatory, tax, legal, and other restrictions that could limit the transferability of funds among entities in the consolidated group, for example, between the parent company and subsidiaries.
    
2. Financial institutions would provide a tabular disclosure based on expected maturities of classes of financial assets and financial liabilities. Financial instruments that are classified at fair value through net income, with the exception of derivatives, would not be placed in maturity buckets and would only show the total carrying amount. The term expected maturity relates to contractual settlement of the instrument, not the entity’s expected timing of the sale of the instrument. The table would include the entity’s off-balance-sheet commitments, for example, loan commitments and lines of credit.
    
3. Nonfinancial entities would provide a tabular disclosure of their undiscounted cash obligations, including off-balance-sheet obligations.

1. A financial institution would provide a tabular disclosure about when its classes of financial assets and financial liabilities would reprice (that is, when their interest rate would be reset). This table also would include the weighted-average yield and duration of the classes of financial assets and financial liabilities.
    
2. A depository institution would provide a tabular disclosure about its issuance of time deposits during the last four quarters. This disclosure would show the entity’s average rate and average life for insured, uninsured, and brokered deposits.
    
3. A financial institution would provide a tabular disclosure of the effect of prospective, hypothetical interest rate shifts on the entity’s interest-sensitive financial assets and liabilities. The table would present the effect of parallel shifts, flatteners, and steepeners. This disclosure does not incorporate the effects of certain assumptions such as a company’s strategy related to assumed growth rate or change in asset mix.

1. Conditional fair value option for groups of financial assets and financial liabilities
    
2. Hybrid financial assets.