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.
May 9, 2012 FASB Board Meeting
Accounting
for financial instruments: impairment. The FASB discussed modified
debt instruments and how they should be considered within the context of the
“three bucket” model.
The Board tentatively decided that an entity would
utilize a credit impairment allowance measurement objective of “lifetime
expected credit losses” for modified debt instruments in which the lender, for
economic or legal reasons related to the debtor’s financial difficulties, grants
a concession to the borrower that the lender would not otherwise consider
(referred to as troubled debt restructurings under current U.S. GAAP). The Board
concluded that in these circumstances a modified debt instrument is a
continuation of the existing instrument and would be evaluated for credit
deterioration in accordance with the instrument’s original terms.
Accounting
for financial instruments: liquidity and interest rate risk
disclosures.
The Board clarified its intent to require
specific qualitative disclosures in the proposed Accounting Standards Update by
deciding that a reporting entity should provide any additional quantitative or
narrative disclosure necessary to provide users of financial statements with an
understanding of its exposure to liquidity risk and interest rate risk. To meet
that objective, the Board decided that a reporting entity should discuss the
significant changes in timing and amounts, as reflected by proposed tabular
disclosures, that occur from the last reporting period to the current period,
discussing reasons for the change(s) and actions taken, if any, during the
current period to manage the exposure.
The Board also clarified its
intent with respect to defining the term financial institution as it
would be used in the proposed Update. The Board decided to create a definition
through the drafting of the proposed Update that focuses on business activities
that would lead a reporting entity or a reportable segment to be considered a
financial institution. The Board decided that the definition will be developed
using the basic premise that a financial institution engages in activities with
the intent of earning its primary source of income as a result of managing the
difference between returns paid on its financial liabilities and returns
received on its financial assets. An entity or reportable segment that meets a
definition of financial institution that is developed on this premise
should be required to provide the disclosures in the proposed Update that apply
only to financial institutions. The Board also decided that an entity or
reportable segment that provides insurance should be required to provide the
same disclosures. The Board further clarified that an entity that carries
substantially all of its assets at fair value with changes in fair value
recognized in net income should not be required to provide the disclosures in
the proposed Update that apply only to financial institutions.