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.
April 6, 2011 FASB Board Meeting
Amortized Cost Category
for financial instruments.
Business Strategy Criterion
for Classifying and Measuring Financial Instruments
discussed refinements to the business strategy criterion for classifying and
measuring financial instruments. The Board decided that an entity should
classify financial instruments based on the business activity the entity uses to
manage those financial instruments rather than on the entity’s intent for an
individual financial instrument. An entity would not be prevented from managing
the same or similar financial instruments through different business activities.
The Board decided to require that an entity classify all financial instruments
into one of the three classification and measurement categories developed. The
Board refined the categories as follows:
The business activity for these financial
instruments must meet all of the following conditions:
Value–Other Comprehensive Income) Category
- Financial instruments issued or acquired for which an entity’s business
strategy, at origination or acquisition of the instrument, is to manage the
instruments through customer financing (lending or borrowing) activities.
These activities primarily focus on the collection of substantially all of the
contractual cash flows from the borrower or payment of contractual cash flows
to the lender.
- Financial instruments for which the holder of the instrument has the
ability to manage credit risk by negotiating any potential adjustment of
contractual cash flows with the counterparty in the event of a potential
credit loss. Sales or settlements would be limited to circumstances that would
minimize losses due to deteriorating credit.
- Financial instruments that are not held for sale (assets) or transfer
(liabilities) at acquisition or issuance.
The business activity for
these financial instruments must meet all of the following
- Financial assets issued or acquired in a business activity for which an
entity’s business strategy, at origination or acquisition of the instruments,
is to invest the cash of the entity either to:
- Maximize total return by collecting contractual cash flows or selling
- Manage the interest rate or liquidity risk of the entity by either
holding or selling the instrument.
- Financial assets that are not held for sale at acquisition or issuance.
FV-NI (Fair Value– Net Income) Category
activity for these financial instruments must meet either of the
Hybrid Financial Instruments
- Financial instruments that are held for sale (assets) or transfer
(liabilities) at acquisition
- Financial instruments that are actively managed and monitored internally
on a fair value basis but do not qualify for the FV-OCI category.
discussed whether certain embedded derivative features in hybrid financial
instruments should be bifurcated and accounted for separately from the host
contract. The Board decided to retain bifurcation and separate accounting of
embedded derivative features for hybrid financial assets and hybrid financial
liabilities as currently required under Subtopic 815-15, Derivatives and