Action Alert No. 05-34
August 25, 2005


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

Wednesday, August 31, 2005, 10:00 a.m.

The Board meeting will begin at 10:00 a.m. instead of 9:00 a.m.

  1. Financial performance reporting by business enterprises. The Board will discuss issues relating to financial reporting for interim periods in the United States.(Estimated 60-minute discussion.)

  2. Open discussion. If necessary, the Board will allow time to discuss minor issues with staff members on technical projects or administrative matters. Those discussions are held following regular Board meetings as topics come up.


Wednesday, August 31, 2005, following the Board meeting

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the September 7, 2005 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


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 or Interpretation.

August 17, 2005 Board Meeting

Subsequent events. Related to its effort to develop an authoritative codification of U.S. GAAP, the Board decided to add a project to its agenda to establish general standards of accounting for and reporting of events that occur subsequent to the balance sheet date.

The Board decided not to undertake a fundamental reexamination of this area. Rather, it plans to develop standards that reflect the principles underpinning current subsequent events guidance in existing accounting standards and in the auditing requirements contained in AICPA Codification of Statements on Auditing Standards, AU Section 560, Subsequent Events.

The Board also decided that an objective of the project would be to consider whether certain minor differences between U.S. GAAP and the corresponding international financial reporting standard, IAS 10, Events after the Balance Sheet Date, could be eliminated or minimized. Those efforts will focus on guidance related to:

  1. The date through which subsequent events are considered for adjustment to or disclosure in the financial statements

  2. The reissuance of financial statements

  3. The examples used to illustrate the accounting requirements.

The Board further decided that the project would not address inconsistencies or differences between U.S. GAAP and international financial reporting standards in the following areas that the Boards plan to address in their joint project on reporting financial performance, including:

  1. Refinancing of short-term obligations

  2. Curing breaches of borrowing covenants

  3. Going concern issues.

The Board directed the staff to prepare a comprehensive draft of the proposed Statement for its further consideration; the draft will incorporate the accounting requirements of AU Section 560 and the staff's proposals to address the international convergence objective of the project.

Useful life and amortization of intangible assets. The Board reconsidered certain aspects of FASB Statement No. 142, Goodwill and Other Intangible Assets, as they relate to the determination of the useful life and amortization of renewable intangible assets. Specifically, the Board discussed a model that addresses previously identified practice issues associated with the application of the criteria in paragraph 11(d) of Statement 142 and decided the following:

  1. At acquisition, the value of the renewable intangible asset should be attributed to the initial contractual period of use and all future renewal periods based on the relative value of the discounted cash flows of each period and amortized to expense over those respective periods.

  2. Incremental and direct costs of renewal should be capitalized and amortized over that renewal period.

  3. Renewable intangible assets should be subject to a fair-value-based test (similar to the impairment test for indefinite lived intangible assets under Statement 142). In the event of an impairment charge, the updated valuation should be utilized for purposes of attributing amortization expense to the remaining renewal periods.

  4. Paragraph 11(d) of Statement 142 should be retained and modified as follows:

    1. Any legal, regulatory, or contractual provisions that enable renewal or extension of the asset's legal or contractual life without substantial cost (provided there is evidence to support renewal or extension and renewal is reasonably assured).

Classification of freestanding financial instruments issued as employee compensation. The Board considered and clarified several issues in preparation of finalizing proposed FSP FAS 123(R)-a, "Classification and Measurement of Freestanding Financial Instruments Originally Issued as Employee Compensation." The Board confirmed that the proposed FSP's indefinite deferral of the requirement in paragraphs A230-232 of FASB Statement No. 123 (revised 2004), Share-Based Payment, should apply similarly to share options and similar instruments, and shares and share units.

Additionally, the Board decided the following:

  1. FSP EITF 00-19-1, "Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation," should be superseded by the final FSP on Statement 123(R).

  2. Paragraph 11(b) of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement 123(R), should be amended to clarify that, in accordance with the guidance in proposed FSP FAS 123(R)-a, an employee award remains subject to the measurement and recognition provisions of Statement 123(R) unless the award is modified when the holder is no longer an employee.

  3. Statement 133 Implementation Issue No. C3, "Exception Related to Share-Based Payment Arrangements," should be amended to clarify that the indefinite deferral does not affect the requirement to evaluate the classification of a nonemployee award once performance has occurred.

  4. Entities can choose between retrospective application and a cumulative effect of a change in accounting principle adjustment through the income statement to effectuate, if necessary, a reclassification.


The FASB and the IASB will hold public roundtable discussions with respondents to their June 30, 2005 Exposure Drafts, Business Combinations, and Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests in Subsidiaries. Those discussions are scheduled for Thursday, October 27, 2005, in Norwalk, Connecticut, and Wednesday, November 9, 2005, in London, England. All FASB members and certain IASB Board members are expected to participate in the Norwalk roundtables. All IASB members and certain FASB members are expected to participate in the London roundtables.

Individuals or organizations interested in participating in the roundtable discussions should submit a request to participate via email to by September 15, 2005. That request must specify the date and location of the preferred roundtable and the name, title, affiliation, telephone number, and email address of the individual that will participate. Due to space limitations, participation is limited to one individual per organization. Organizations wishing to participate in both roundtables may request to do so and, depending on space availability, may be invited to participate in both discussions.

Individuals and organizations that want to participate in the roundtable discussions are required to submit their comment letter on the Exposure Drafts or a summary of key issues that will be raised in their comment letter by September 23, 2005. We will use the draft comments and summaries solely for the purposes of the roundtable and selecting participants.

The FASB will notify individuals about their selection status by September 30, 2005.


The Board will hold a roundtable discussion with respondents to its July 14, 2004 proposed Interpretation, Accounting for Uncertain Tax Positions, on October 10, 2005, in Norwalk, Connecticut. The Board invites individuals interested in participating in the roundtable discussion to respond to by Friday, September 9, 2005. Those wishing to participate should include their name, title, affiliation, email address, and telephone number.


The following is a list of open meetings tentatively scheduled through September. 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, September 7, 2005—FASB Board Meeting
Wednesday, September 7, 2005—FASB Education Session
Friday, September 9, 2005—Liaison Meeting with the CFA Institute
Wednesday, September 14, 2005—FASB Board Meeting
Wednesday, September 14, 2005—FASB Education Session
Thursday, September 15, 2005—FASB Emerging Issues Task Force Meeting
Monday, September 19, 2005—Liaison Meeting with the AICPA PCPS Technical Issues Committee
Wednesday, September 21, 2005—FASB Board Meeting
Wednesday, September 21, 2005—No FASB Education Session Scheduled
Thursday, September 22, 2005—Financial Accounting Standards Advisory Council Meeting
Friday, September 23, 2005—Liaison Meeting with the Institute of Management Accountants
Wednesday, September 28, 2005—FASB Board Meeting
Wednesday, September 28, 2005—FASB Education Session
Thursday, September 29, 2005—User Advisory Council Meeting, New York City