Action Alert No. 05-14
April 7, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
meetings are available by audio webcast and telephone.)
Wednesday, April 13, 2005, 9:00 a.m.
special-purpose entities and isolation of transferred assets.
The Board will continue its discussion of the accounting for transfers
of financial assets under FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, from the March 23, 2005 Board meeting. The discussion
is expected to focus on two issues: (a) defining a participating
interest that qualifies for derecognition without using a qualifying
special-purpose entity and (b) the comment period for the Exposure Draft
and its proposed transition and effective date provisions. (Estimated
interests. The Board will discuss the following issues on the
proposed Exposure Draft: disclosure, transition, comment period, and
effective date. (Estimated 60-minute discussion.)
rights. The Board will discuss the following issues on the
proposed Exposure Draft: transition, comment period, and effective date.
(Estimated 30-minute discussion.)
instruments: derivatives implementation. The Board will discuss
effective date and transition guidance of proposed Statement 133
Implementation Issue No. B39, "Application of Paragraph 13(b) to Call
Options That Are Exercisable Only by the Debtor." The Board will also
decide whether to proceed with a discussion of proposed Statement 133
Implementation Issue No. B38, "Evaluation of Net Settlement with Respect
to the Settlement of a Debt Instrument through Exercise of an Embedded
Put Option or Call Option." (Estimated 60-minute 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
Thursday, April 14, 2005, 8:30 a.m.
The Board will hold an educational, non-decision-making session to
discuss topics that are anticipated to be discussed at the April 21, 2005
FASB/IASB joint Board meeting and the April 27 FASB 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
March 30, 2005 Board Meeting
instruments: liabilities and equity. The Board discussed three
issues related to classification of single component instruments and
- Perpetual instruments would be classified as equity even if those
instruments do not meet the criteria to be direct ownership instruments.
- Settlement requirements of all instruments would be reevaluated at
the consolidated entity level to determine the classification of those
instruments by that entity. For example, perpetual instruments of a
consolidated subsidiary would not be equity for the consolidated
financial statements of the parent entity unless those instruments would
be perpetual (or direct ownership instruments) of that reporting entity.
- To meet one of the two necessary criteria of a direct ownership
instrument, a holder’s claim on an entity’s net assets can neither be
limited nor guaranteed either before or at liquidation. The Board also
decided that instruments of nonpublic entities that are redeemable at an
entity’s book value or other value representing fair value would not
represent a limited claim and, therefore, those instruments would be
classified as equity if they otherwise qualify as a direct ownership
FASB Staff Position (FSP). The Board discussed whether a
proposed FSP should be issued to clarify the applicability of Statement
150 and FSP FAS 150-1 to warrants on redeemable shares and decided:
- To issue the proposed FSP clarifying that warrants and options on
redeemable shares are liabilities under paragraph 11 of FASB Statement
No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, and FSP FAS 150-1,
“Issuer's Accounting for Freestanding Financial Instruments Composed of
More Than One Option or Forward Contract Embodying Obligations under
FASB Statement No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity,” regardless of
the redemption timing or price.
- That the proposed FSP would have a cumulative-effect transition
according to the provisions of Statement 150.
The Board instructed the staff to proceed to a draft of a proposed FSP
for vote by written ballot and to post that proposed FSP to the website
with a 45-day comment period.
option. The Board decided that no eligibility criteria should be
imposed on the election of the fair value option. It was agreed that broad
availability of the fair value option is more consistent with the
fundamental objectives of the project.
However, in considering whether to establish any scope exceptions, the
Board decided that the fair value option cannot be elected for the
following financial assets and financial liabilities:
- An investment (principally an investment in a subsidiary) that would
otherwise be consolidated
- Employers’ and plans’ financial obligations for pension benefits,
other postretirement benefits (including health care and life insurance
benefits), postemployment benefits, employee stock option and stock
purchase plans and other forms of deferred compensation arrangements as
defined in FASB Statements No. 35, Accounting and Reporting by
Defined Benefit Pension Plans, No. 87, Employers’ Accounting for
Pensions, No. 106, Employers’ Accounting for Postretirement
Benefits Other Than Pensions, No. 112, Employers’ Accounting for
Postemployment Benefits, No. 123 (revised 2004), Share-Based
Payment, No. 43, Accounting for Compensated Absences, and No.
146, Accounting for Costs Associated with Exit or Disposal
Activities, and APB Opinion No.12, Omnibus Opinion—1967
- Financial liabilities recognized under lease contracts as defined in
FASB Statement No. 13, Accounting for Leases. (This does not
include a contingent obligation arising out of a cancelled lease and a
guarantee of a third-party lease obligation.)
In addition, the Board directed the staff to use the Notice for
Recipients in the Exposure Draft to solicit feedback from respondents
regarding additional scope exceptions, which the Board considered and
rejected at the meeting.
hierarchy. The Board decided that the Exposure Draft of the
proposed Statement on the hierarchy of generally accepted accounting
principles should provide the types of documents that make up the sources
of category (a) through (d) accounting principles as set forth in
paragraph .10 of AICPA Statement on Auditing Accounting Standards No. 69,
The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles in the Independent Auditor’s Report.
The Board also decided that FSPs and Statement 133 Implementation
Issues issued by the Derivatives Implementation Group should be sources of
category (a) accounting principles.
EITF consensus. The Board ratified the Task Force's consensus on
EITF Issue No. 04-6, "Accounting for Stripping Costs Incurred during
Production in the Mining Industry."
The Board also added to its agenda a project that will provide guidance
on the variability that should be considered when determining whether an
interest is a variable interest in a potential variable interest
plan. The Board discussed its technical plan for the six-month
period from April 1, 2005, through September 30, 2005, and approved it for
publication in the April issue of THE FASB REPORT. That approved
plan reflects the following changes to the technical plan timetable as of
January 1, 2005:
- Exposure Drafts of proposed Statements on business combinations and
accounting for and reporting of noncontrolling interests are expected to
be issued in the second quarter of 2005. The Exposure Draft on
combinations of not-for-profit organizations is planned for the third
quarter of 2005.
- The Board set a goal of issuing a due process document on its
conceptual framework project in the fourth quarter of 2005. That due
process document would address issues relating to the objectives of
financial reporting and the qualitative characteristics of accounting
- The Board decided not to commence work immediately on the second
phase of its project on share-based payment. That phase would include
reconsideration of the accounting for share-based payments with
nonemployees and employee share ownership plans.
- A final Statement on fair value measurement is now expected to be
issued in the third quarter of 2005.
- The Board set a goal of issuing a due process document on its
project on liabilities and equity in the first quarter of 2006. That
document will be in the form of a Preliminary Views document.
- The Board noted that the timing of the initial due process document
on its project on revenue recognition will be determined after it
completes its reassessment of its approach to that project. The Board
plans to complete that reassessment in the second quarter of 2005 and
will update its technical plan at that time.
- The final Statement on the short-term international convergence
project on accounting changes is expected to be issued in the second
quarter of 2005. The Exposure Draft on proposed changes to FASB
Statement No. 128, Earnings Per Share, now is expected to be
issued in the second quarter of 2005. The Board’s goal is to issue a
final Statement that would amend Statement 128 in the third quarter of
- The Exposure Draft on proposed changes to FASB Statement No. 109,
Accounting for Income Taxes, resulting from the Board’s
short-term international convergence project on income taxes is expected
to be issued in the third quarter of 2005.
- The issuance date for an Exposure Draft on fair value option was
added and is expected in the third quarter of 2005.
- The issuance date for the Exposure Draft on uncertain tax positions
was moved to the second quarter of 2005. Issuance of the final Statement
was moved to the fourth quarter of 2005.
- The table was expanded to include the timing of potential FSPs and
- The issuance date of the GAAP hierarchy Exposure Draft was moved to
the second quarter of 2005.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
May. All meetings are held in Norwalk, Connecticut, unless otherwise
noted. 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.
Thursday, April 21, 2005—IASB/FASB Joint Board Meeting,
Wednesday, April 27, 2005—FASB Board Meeting
27, 2005—FASB Education Session
Wednesday, May 4, 2005—FASB Board
Wednesday, May 4, 2005—FASB Education Session
Monday, May 9,
2005—American Accounting Association Liaison Meeting
Wednesday, May 11,
2005—FASB Board Meeting
Wednesday, May 11, 2005—FASB Education
Wednesday, May 18, 2005—FASB Board Meeting
18, 2005—FASB Education Session
Friday, May 20, 2005—American Petroleum
Institute Risk Control and Accounting Committee Liaison
Tuesday, May 24, 2005—Equipment Leasing Association of America
Wednesday, May 25, 2005—FASB Board
Wednesday, May 25, 2005—FASB Education Session