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 a final standard.

January 7, 2009 Board Meeting

Financial instruments: amendments to EITF Issue No. 99-20. The Board discussed comment letters received on proposed FSP EITF 99-20-a, Amendments to the Impairment and Interest Income Measurement Guidance of EITF Issue No. 99-20.   The proposed FSP would address certain practice issues in applying the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” by making that guidance consistent with FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities.

The Board considered the issues raised in the comment letters and affirmed its previous decision to address the practice issue highlighted in the proposed FSP in the short term by issuing a final FSP.  The Board acknowledged the other impairment issues raised in the comment letters, noting that it intends to address those issues in its comprehensive project on accounting and reporting for financial instruments.

The Board decided that the final FSP will reiterate and emphasize the principle behind an other than temporary impairment assessment and the related disclosure requirements in Statement 115 and other related guidance.   In particular, the final FSP will emphasize the need for entities to:

  1. Consider guidance in Statement 115, FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, and SEC Staff Accounting Bulletin Topic 5M, Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities, when determining whether an impairment is other than temporary.

  2. Consider all available information, reflecting past events and current conditions, when developing the estimate of future cash flows for determining whether to record an other than temporary impairment.  All available information would include, but not be limited to, the remaining payment terms of the instrument and economic factors that are relevant to the collectibility of the instrument, such as current prepayment speeds, the current financial condition of the issuer(s), and the value of any underlying collateral.

  3. Exercise judgment when assessing whether declines in fair value are indicative of a decline in the cash flows expected from the issuer of the security.   For example, an entity should not automatically conclude that a security is not impaired because all of the scheduled payments to date have been received.   Nor should an entity automatically conclude that every decline in fair value represents an other than temporary impairment.

The Board also affirmed its previous decision that the FSP should be effective for interim and annual reporting periods ending after December 15, 2008, and should be applied prospectively. In addition, the Board decided to clarify that retrospective application to a prior interim or annual reporting period is not permitted.

The Board directed the staff to proceed to a draft of the final FSP for vote by written ballot.