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Revised 09/3/04—See below
Action Alert No. 04-34
September 2, 2004
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, September 8, 2004, 9:00 a.m.
- [Updated 9/3/04—Revised topic for
discussion] Equity-based
compensation. The Board will continue redeliberations of its
March 2004 Exposure Draft, Share-Based Payment, an amendment of
FASB Statements No. 123 and 95. The Board plans to address issues
related to employee share purchase plans and disclosures. (Estimated
75-minute discussion.)
- [Updated 9/2/04—This topic will be
rescheduled to a later Board meeting] Servicing
rights. The Board will continue its deliberations of the
disclosure requirements for servicing rights. (Estimated 1-hour
discussion.)
- FASB Staff Positions (FSPs). The Board will consider the
following:
- Comments received on proposed FSP FAS 142-c, “Application of FASB
Statement No. 142, Goodwill and Other Intangible Assets, to
Exchange Memberships” and whether to direct the staff to post that FSP
to the FASB website as final. (Estimated 30-minute discussion.)
- Whether to direct the staff to post to the FASB website a proposed
FSP providing certain implementation guidance with respect to
interest-rate impairments, and a delayed implementation date for the
areas affected by the implementation guidance, under EITF Issue No.
03-1, “The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments.” (Estimated 1-hour
discussion.)
- 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.
OPEN EDUCATION SESSION
Wednesday, September 8, 2004, immediately 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 15,
2004 Board meeting. Those topics will be posted to the FASB calendar four
days prior to the education session.
BOARD ACTIONS
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 25, 2004 Board Meeting
Equity-based
compensation. The Board continued its redeliberations of its March
2004 FASB Exposure Draft, Share-Based Payment, an amendment of FASB
Statements No. 123 and 95. The Board discussed methods of accounting for
income tax effects of share-based payment awards, accounting for those
effects in the statement of cash flows, and determining the compensatory
status of employee share purchase plans. The Board made the following
decisions regarding those issues.
Accounting for Income Tax Effects of Share-Based Payment
Awards
The Board decided to change the accounting method for equity awards
from that proposed in the Exposure Draft to the method originally
promulgated in FASB Statement No. 123, Accounting for Stock-Based
Compensation. Those two methods differ in the accounting for a tax
benefit deficiency, which is the portion of a recognized deferred tax
asset that will not be realized because the tax deduction for an award is
less than the total recognized compensation cost for that award. The
Exposure Draft proposed that the write-off of the portion of the deferred
tax asset related to that deficiency, net of the related valuation
allowance, would be recognized in the income statement. Under the
Statement 123 method, that write-off, net of the related valuation
allowance, is recognized in the income statement except to the extent that
there is remaining additional paid-in capital from excess tax benefits
from previous share-based payment awards accounted for in accordance with
the fair value based method in Statement 123.
The Board affirmed its support for the proposed amendment to FASB
Statement No. 95, Statement of Cash Flows, that would require
excess tax benefits, as defined in the final Statement, to be reported as
a financing cash inflow. The Board directed the staff to consider whether
any revisions to that amendment are necessary in light of the Board’s
decision to change the method of accounting for income tax effects.
Employee Share Purchase Plans (ESPPs)
The Board decided to modify the guidance for determining the
compensatory status of ESPPs in the Exposure Draft. The Board decided that
an ESPP is not compensatory and does not give rise to recognizable
compensation cost if all of the following conditions are met:
- The ESPP satisfies one of the following criteria:
- The terms of the ESPP are no more favorable than those available
to all holders of the same class of shares.
- Any discount for the purchase of shares provided under the plan
results in proceeds to the employer that are not less than the
proceeds it would receive in an offering of shares if the shares had
been issued to third parties by other means, for example, through an
underwriter.
- Substantially all eligible employees that meet limited employment
qualifications may participate on an equitable basis.
- The ESPP does not incorporate option features. For example, a plan
in which the purchase price is based on the share price at date of grant
and that permits a participating employee to cancel participation before
the purchase date and obtain a refund of amounts previously paid is a
compensatory plan. The Board will consider related implementation issues
at a future Board meeting.
Interpretation
of Statement 143. The Board redeliberated several issues and
discussed comments received on its proposed Interpretation, Accounting
for Conditional Asset Retirement Obligations, an interpretation of
FASB Statement No. 143, Accounting for Asset Retirement
Obligations. The Board made the following decisions:
- Uncertainty about the timing and method of settlement should be
factored into the measurement of the conditional asset retirement
obligation rather than affect whether a liability should be recognized.
- There are no instances where a law or regulation obligates an entity
to perform retirement activities but then allows the entity to
permanently avoid settling the obligation.
- The final Interpretation will be effective no later than the end of
the fiscal year ending after December 15, 2005. Additionally, the final
Interpretation will permit but not require restatement of interim
financial information during any period of adoption. The Board also
decided to require both recognition of a cumulative change in accounting
and disclosure of the liability on a pro forma basis for transition
purposes.
The Board directed the staff to proceed to a draft of a final
Interpretation for vote by written ballot.
AcSEC clearance. The Board met with representatives of the
AICPA's Accounting Standards Executive Committee (AcSEC) and discussed
clearance of a draft of the final AICPA Statement of Position (SOP),
Accounting for Real Estate Time-Sharing Transactions. The Board did
not object to issuance of the final SOP.
FASB STAFF POSITION GUIDANCE AVAILABLE
On September 1, 2004, a majority of the Board did not object to the
release of final FSP
FAS 142-2, “Application of FASB Statement No. 142, Goodwill and
Other Intangible Assets, to Oil- and Gas-Producing Entities.”
This final FSP will be available on the FASB website by the end of
business on September 2, 2004, where it will remain until it can be
incorporated into printed FASB literature.
FUTURE OPEN MEETINGS
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.
Tuesday, September 14, 2004—Liaison Meeting with the Institute of
Management Accountants
Wednesday, September 15, 2004—FASB
Informational Board Meeting on Equity-Based Compensation with Outside
Representatives
Wednesday, September 15, 2004—FASB Board
Meeting
Wednesday, September 15, 2004—FASB Education Session
(tentative)
Monday, September 20, 2004—Liaison Meeting
with the American Gas Association
Tuesday, September 21, 2004—Fair
Value Measurement Roundtable Discussion
Wednesday, September 22,
2004—FASB Board Meeting
Wednesday, September 22, 2004—FASB Education
Session (if needed)
Thursday, September 23, 2004—Financial
Accounting Standards Advisory Council Meeting
Friday, September 24,
2004—FASB Education Session
Wednesday, September 29, 2004—FASB Board
Meeting
Wednesday, September 29, 2004—Emerging Issues Task Force
Meeting
Thursday, September 30, 2004—Emerging Issues Task Force
Meeting
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