Action Alert No. 07-52
December 28, 2007


(Board meetings are available by audio webcast and telephone.)

No Board meetings are planned for the week of December 31, 2007. The next scheduled Board meeting is Wednesday, January 9, 2008, and will be announced in next week’s issue of Action Alert.


Friday, January 4, 2008, 9:00 a.m.

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at a future Board meeting. Those topics will be posted to the FASB calendar four days prior to the education sessions.


The Board Actions 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 Statement, Interpretation, FSP, or Statement 133 Implementation Issue.

December 19, 2007 Board Meeting

Agenda decision: intangible assets. The Board decided not to add a project on intangible assets to its agenda. The Board acknowledged the importance of addressing the accounting issues relating to intangible assets, noting concerns with current requirements that lead to inconsistent treatments for particular types of intangible assets depending on how they arise. However, the Board noted that properly addressing the accounting for intangible assets would impose a large demand on the Board’s limited resources. The IASB reached the same conclusions at its most recent Board meeting.

Conceptual framework: elements and recognition. The Board considered whether to modify its approach to developing a definition of a liability for purposes of the improved conceptual framework to more closely align that definition with alternatives being considered in the Board’s recently released Preliminary Views, Financial Instruments with Characteristics of Equity. The Board considered an approach that would initially focus on defining the broader class of items that would be candidates for inclusion in a statement of financial position as either liabilities or equity, and subsequently subdividing that broader class into those items that constitute liabilities and those that constitute equity.

The Board suggested testing the working definition of a liability against examples that have characteristics of both liabilities and equity to help ensure that the conceptual definitions being developed will be compatible with the proposals in the liabilities and equity project.

The Board tentatively decided that the FASB and IASB definitions of a liability should be converged by focusing on defining a liability as an economic obligation, rather than as probable future sacrifices, and should be improved by:

  1. Removing the assessment of likelihood

  2. Replacing references to past transactions or other events with a focus on the present.

The IASB separately discussed the above changes to converge and improve the definitions of a liability and reached similar decisions.

Accounting for depreciable assets classified as held-for-sale when an equity method investment is obtained. The Board discussed issues raised by respondents to proposed FSP FAS 144-c, Classifying and Accounting for a Depreciable Asset as Held-for-Sale When an Equity Method Investment Is Obtained. The Board decided not to issue the FSP as final and removed the project from its agenda.

December 20, 2007 Board Meeting

Statement 133 hedging. The Board continued its deliberations of the hedging project to amend FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, as follows:

  1. Foreign currency hedge accounting model. The Board decided to retain the ability that currently exists in Statement 133 for an entity to designate the risk of changes in fair value attributable to changes in foreign currency exchange rates in a fair value hedge. The Board also decided to retain the ability that currently exists in Statement 133 for an entity to designate the risk of changes in functional-currency-equivalent cash flows attributable to changes in foreign exchange rates in a cash flow hedge. The current Statement 133 guidance related to net investment hedges also was retained. For entities hedging their own issued debt at inception, the Board decided to permit an entity to designate foreign currency exchange risk or a combination of foreign currency exchange rate risk and interest rate risk in addition to just designating interest rate risk as the hedged risk.

  2. Dedesignation of hedging relationships. The Board decided that entities should not be permitted to discontinue fair value hedge accounting or cash flow hedge accounting by simply removing the designation of the hedging relationship.

  3. Reclassification of amounts in other comprehensive income. The Board decided that entities would not be permitted to elect the fair value option for a debt instrument upon its issuance if the entity designated a cash flow hedge for the forecasted issuance of that debt.

  4. Disclosures. The Board decided to require the following two disclosures:

    1. A reconciliation between the carrying value of hedged items at the end of the reporting period and what the carrying value would have been prior to any cumulative fair value adjustments.

    2. As part of an entity’s debt disclosure, (1) that it uses derivative contracts (interest rate swaps) to convert a portion of its fixed-rate debt to variable-rate debt and variable-rate debt to fixed rate debt, (2) how the maturity structure of the derivatives corresponds to the maturity structure of the debt being hedged, and (3) the overall weighted-average interest rate on a contractual basis, including the effects of derivatives.

  5. Effective date and transition. The Board decided that the proposed Statement should be effective for fiscal years beginning after November 15, 2008, and that earlier application would not be permitted. The Board decided that (a) prospective application of the guidance in the proposed Statement would be required for fair value hedges and (b) limited retrospective application (cumulative catch-up) would be required for cash flow hedges.

  6. Fair value option election. The Board decided that a one-time fair value option election should be permitted at the initial adoption of the proposed Statement for eligible assets and liabilities currently hedged under Statement 133.

The Board authorized the staff to proceed to a draft of an Exposure Draft for vote by written ballot.

Statement 133 Implementation Issue—clarification of the application of the shortcut method. The Board decided to address the following items in the final guidance:

  1. Swaps that have a non-zero fair value at inception, provided that the difference between the transaction price (zero) and the fair value (exit price), as defined by FASB Statement No. 157, Fair Value Measurements, is solely attributable to a bid-ask spread (paragraph 68(b))

  2. Hedged items that have a settlement date subsequent to the swap trade date (paragraph 68(b)).

The Board decided not to redeliberate any of the additional issues that had been included in the proposed implementation issue and discussed in the comment letters because of the Statement 133 hedging project discussed above.

The Board decided that the implementation guidance in this Issue should be effective for hedging relationships designated on or after January 1, 2008. A final implementation issue will be issued in January 2008.


The following is a list of open meetings tentatively scheduled through February. Because schedules may change, please check the FASB calendar before finalizing your plans. Revisions to this list since the last issue of Action Alert are highlighted in bold.

Wednesday, January 9, 2008—FASB Board Meeting
Wednesday, January 9, 2008—FASB Education Session
Wednesday, January 16, 2008—FASB Board Meeting
Wednesday, January 16, 2008—FASB Education Session
Wednesday, January 23, 2008—FASB Board Meeting
Wednesday, January 23, 2008—FASB Education Session
Friday, January 25, 2008—Liaison Meeting with National Association of Real Estate Investment Trusts
Wednesday, January 30, 2008—FASB Board Meeting
Wednesday, January 30, 2008—FASB Education Session
Wednesday, February 6, 2008—FASB Board Meeting
Wednesday, February 6, 2008—FASB Education Session
Wednesday, February 13, 2008—FASB Board Meeting
Wednesday, February 13, 2008—FASB Education Session
Wednesday, February 20, 2008—FASB Board Meeting
Wednesday, February 20, 2008—FASB Education Session
Wednesday, February 27, 2008—FASB Board Meeting
Wednesday, February 27, 2008—FASB Education Session