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 an Accounting Standards Update.
January 25, 2011 FASB Board Meeting [Revised 01/26/11]Accounting
for financial instruments: classification and measurement. In
response to the overwhelming feedback received on the proposed Accounting
Standards Update, the Board continued its discussion about whether to measure
certain financial assets at amortized cost. Additional information is available
in the summary
of feedback received on the classification and measurement model in
the proposed Accounting Standards Update.
At the December 21, 2010
meeting, the Board decided that both the characteristics of the financial asset
and an entity’s business strategy should be used as criteria in determining the
classification and measurement of financial assets. At that meeting, the Board
also tentatively decided to consider three categories for financial assets:
At this January 25, 2011 meeting, the Board
discussed the business strategy criterion to determine which financial assets
would be measured at amortized cost. The Board decided that a business activity
approach should be used and that financial assets that an entity manages for the
collection of contractual cash flows through a lending or customer financing
activity should be measured at amortized cost.
- Fair Value–Net Income (FV-NI)—Fair value measurement with all changes in
fair value recognized in net income
- Fair Value–Other Comprehensive Income (FV-OCI)—Fair value measurement with
qualifying changes in fair value recognized in other comprehensive
- Amortized Cost.
The Board also decided
that for all other business activities, financial assets should be measured at
fair value. The Board decided that financial assets for which an entity’s
business activity is trading or holding for sale should be classified in the
FV-NI category and that financial assets for which an entity’s business activity
is investing with a focus on managing risk exposures and maximizing total return
should be classified in the FV-OCI category.
The Board requested the
staff to refine which business activities would qualify for each classification
and measurement category. Additionally, the Board requested the staff to
evaluate how various types of financial assets would be classified on the basis
of the refined criterion.
The Board also discussed the following:
The Board decided that
reclassifications between categories of financial assets would not be permitted.
However, the Board requested that the staff provide at a future meeting
presentation or disclosure alternatives for financial assets originally
classified in the amortized cost category that the entity subsequently sells.
The Board also agreed to continue to discuss at future meetings disclosures for
financial instruments that would provide transparency about the risks inherent
in financial instruments and how an entity manages those risks.
- Whether reclassifications between the three categories noted above should
be permitted or required
- Whether subsequent sales of financial assets classified at amortized cost
would call into question or “taint” the remaining financial assets classified
in the amortized cost category
- Whether changes in fair value that have been recognized in other
comprehensive income should be recognized in net income when such gains or
losses are realized from sales or settlements.
Board decided that subsequent sales would not taint an entity’s financial assets
classified at amortized cost.
The Board reaffirmed its decision in the
proposed Accounting Standards Update to recognize any realized gains and losses
from sales of financial assets classified as FV-OCI in net income when such
gains or losses are realized from sales or settlements.
In addition, the
Board and the IASB agreed to revisions that will enhance the guidance about
accounting for credit impairments of loans and other financial assets managed in
an open portfolio. In January 2011, the Boards intend to issue for comment a
supplementary document to the FASB’s and the IASB’s Exposure Drafts about
accounting for financial