Action Alert No. 08-14
April 3, 2008
NOTICE OF MEETINGS
OPEN BOARD MEETING
meetings are available by audio webcast and telephone.)
Wednesday, April 9, 2008, 8:00 a.m.
The Board meeting will begin at 8:30 a.m. instead of 9:00
recognition (estimated 1.5-hour discussion). The Board
will discuss the first three draft chapters of the discussion paper that
is planned for issuance around June 30, 2008. Those chapters deal with
initial recognition and subsequent accounting for contracts with
customers. In particular, the Board will discuss the type of contract
accounted for in the proposed revenue recognition model, the definition
of a performance obligation, and how a performance obligation is
of liabilities (estimated 1-hour discussion). The Board
will discuss issues raised by respondents to proposed FSP FAS 157-c,
Measuring Liabilities under FASB Statement No. 157, and whether
to issue that FSP as final.
- Reconsideration of Interpretation 46(R) (estimated
1.5-hour discussion). The Board will discuss potential issues and
recommendations related to FASB Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities, as a result
of potential changes to FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, and recent market events.
- 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, April 9, 2008, following the Board meeting
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 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, Interpretation, FSP, or
Statement 133 Implementation Issue.
March 26, 2008 Board Meeting
of EITF consensuses and tentative conclusions. The Board
considered and ratified the consensus reached at the March 12, 2008 EITF
meeting on Issue No. 07-4, "Application of the Two-Class Method under FASB
Statement No. 128 to Master Limited Partnerships."
The Board considered and ratified three consensuses-for-exposure
reached at the March 12, 2008 EITF meeting on Issues No. 07-5,
"Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity's Own Stock," No. 08-3, "Accounting by Lessees for Nonrefundable
Maintenance Deposits," and No. 08-4, "Transition Guidance for Conforming
Changes to Issue No. 98-5." The Board also approved the exposure of a
draft abstract for each Issue and decided on the length of the comment
hierarchy. The Board decided to include in the final Statement the
grandfathering provisions related to EITF Issues and Statements of
Position in AICPA Statement on Auditing Standards No. 69, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Board also decided to refer to all SEC literature in one
footnote rather than in two footnotes. Finally, the Board decided that the
effective date of the final Statement should be the same as the effective
date of auditing literature.
debt instruments that may be settled in cash upon conversion (including
partial cash settlement). The Board discussed comments received on
proposed FSP APB 14-a, Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). The Board reached the following decisions:
- The Board reaffirmed the scope of the proposed FSP.
- The Board reaffirmed the guidance in the proposed FSP on the
- Recognition and initial measurement, including the liability-first
- Subsequent measurement
- Accounting for modifications and derecognition.
- Transaction costs should be allocated between the liability and
equity components in proportion to the allocation of the proceeds.
- The final FSP will be effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years.
- The final FSP should be applied retrospectively to all periods
- The provisions of FASB Statement No. 34, Capitalization of
Interest Cost, should be applied to all periods in which the
instrument was outstanding; however, entities should not re-perform
impairment tests for prior periods in connection with retrospective
- The guidance in the final FSP does not affect the determination of
whether the liability component should be presented as a current
liability or a long-term liability in the balance sheet under other
applicable U.S. generally accepted accounting principles.
- The final FSP will contain explicit disclosure requirements.
The Board directed the staff to proceed to a draft of a final FSP for
vote by written ballot.
changes to consolidation and equity method guidance for not-for-profit
organizations. The Board discussed comments received on proposed
FSP SOP 94-3-a and AAG HCO-a, Omnibus Changes to Consolidation and
Equity Method Guidance for Not-for-Profit Organizations, and made the
- The Board reaffirmed that the scope of this project is to address
conflicts or areas of uncertainty in the existing authoritative
accounting literature concerning the consolidation and equity method
guidance for not-for-profit organizations in conjunction with the
Codification, not to comprehensively revisit or rewrite the guidance for
accounting and reporting of interests in other entities by
- The Board will not expand the scope of the FSP to eliminate the
optionality of consolidation when control over another not-for-profit
organization exists by means other than majority voting interest in the
board of that organization, such as by contract or affiliation
- The Board will not expand the scope of this project to consider
consolidation principles for not-for-profit organizations when the usual
characteristics of a controlling financial interest are absent.
- The FSP will require not-for-profit organizations to follow the
consensus reached in EITF Issue No. 90-15, "Impact of Nonsubstantive
Lessors, Residual Value Guarantees, and Other Provisions in Leasing
Transactions." The FSP will remain silent on whether not-for-profit
organizations should apply the SEC staff views expressed in Issue 90-15
(Questions 1–9) and EITF Topic No. D-14, "Transactions involving
Special-Purpose Entities." (The Codification will not include Questions
1–9 or Topic D-14.) However, the FSP will include language from Topic
D-14 that, in order for a lessee not to be required to consolidate a
special-purpose entity lessor, the majority owner(s) of record of the
lessor must be an independent third party.
- The FSP will not provide an exception or substitute alternative
disclosure requirements for the disclosure requirements in paragraph 20
of APB Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock, for equity method investees that are
not aligned with the operations or mission of the not-for-profit
- The FSP will remain silent on the applicability of the guidance in
EITF Topic D-46, "Accounting for Limited Partnership Investments" (which
constitutes SEC staff views) for not-for-profit organizations.
- The scope of AICPA Statement of Position 78-9, Accounting for
Investments in Real Estate Ventures, should not be expanded to
include non-real-estate partnership interests held by for-profit health
care providers and other business entities.
- The FSP will require a cumulative change adjustment when an
organization must change its accounting to comply with the provisions of
the FSP, for its relationships, arrangements, or interests in existence
as of the effective date of the FSP. (The proposed FSP would have
generally required retrospective application of its provisions.)
- The Board agreed to extend to not-for-profit organizations a
one-time opportunity to elect fair value for partnership and similar
interests that are financial instruments and that exist as of the
effective date of the FSP if the provisions of the FSP would require
those interests to be accounted for under the equity method of
accounting for the first time and if the organization’s deadline for
electing the fair value option under FASB Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities, has
The Board directed the staff to proceed to a draft of a final FSP for
vote by written ballot.
Open discussion: agenda decision—reconsideration of Interpretation
46(R). The FASB chairman announced that the Board has had discussions
on FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities. The discussions arose from the current
project on FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, to
possibly eliminate qualifying special-purpose entities. The FASB chairman
announced that the Board will be reconsidering certain provisions of
Interpretation 46(R), including the factors to determine the primary
beneficiary, implicit guarantees, expected losses, and disclosures.
FASB DOCUMENT AVAILABLE
FASB Invitation to Comment, Reducing
Complexity in Reporting Financial Instruments, was issued on
March 28, 2008, and is available on the FASB website. Comments are
requested by September 19, 2008.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
May. 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, April 16, 2008—FASB Board Meeting
Wednesday, April 16,
2008—FASB Education Session
Monday, April 21, 2008—FASB/IASB Joint
Board Meeting, London
Tuesday, April 22, 2008—FASB/IASB Joint Board
Thursday, April 24, 2008—FASB Education
Wednesday, April 30, 2008—FASB Board Meeting
April 30, 2008—FASB Education Session
Tuesday, May 6, 2008—FASB
Wednesday, May 7, 2008—FASB Board Meeting
May 7, 2008—FASB Education Session
Wednesday, May 14, 2008—FASB Board
Wednesday, May 14, 2008—FASB Education Session
May 21, 2008—FASB Board Meeting
Wednesday, May 21, 2008—FASB Education
Thursday, May 22, 2008—Liaison Meeting with Healthcare
Financial Management Association
Wednesday, May 28, 2008—FASB Education