Action Alert No. 05-18
May 5, 2005


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

Wednesday, May 11, 2005, 8:00 a.m.

The Board meeting will begin at 8:00 a.m. instead of 9:00 a.m.

  1. Employee compensation: classification of freestanding financial instruments. The Board will consider comment letters received on proposed FASB Staff Position (FSP) EITF 00-19-a, "Application of EITF Issue No. 00-19, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,' to Freestanding Financial Instruments Originally Issued as Employee Compensation." The Board will discuss whether to proceed to a draft of a final FSP. (Estimated 45-minute discussion.)

  2. Financial instruments: liabilities and equity. The Board will address the following issues related to accounting for single component instruments: (a) display and measurement (including accounting for issuance costs), (b) recognition of forward contracts, and (c) subsequent classification assessment and the accounting upon reclassification. (Estimated 90-minute discussion.)

  3. Revenue recognition. The Board will discuss whether the objective and scope of the project should be changed and, if so, how. The Board will consider various alternatives that include, but are not limited to, (a) continuing development of a conceptual model and a broadly applicable standard that is based on it, (b) developing conceptual guidance as part of the broader conceptual framework project, and (c) undertaking one or more separate projects aimed at filling voids in existing U.S. GAAP for certain classes of revenue transactions. (Estimated 90-minute discussion.)

  4. Short-term international convergence: accounting changes and error corrections. The Board will discuss two issues that arose in drafting the final Statement. The first is an issue related to a proposed disclosure requirement. The second is whether a change from one allowable transition method to another will be addressed in the final Statement and, if so, how. (Estimated 45-minute discussion.)

  5. Life settlements. The Board will consider measurement model alternatives for life settlements, as well as disclosure requirements, and transition. (Estimated 60-minute discussion.)

  6. Amendment of Statements 87 and 35. The Board will discuss the status of the project and consider the next steps. (Estimated 30-minute discussion.)

  7. 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.



Thursday, May 12, 2005, 9:00 a.m.

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the May 18, 2005 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.



Monday, May 9, 2005, 1:00 p.m.

The Board will meet with representatives of the American Accounting Association's Financial Accounting Standards Committee to discuss matters of mutual interest.



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.

April 27, 2005 Board Meeting

Business combinations: purchase method procedures. The Board discussed the comment period and effective date for the forthcoming Exposure Drafts on business combinations and noncontrolling interests. The Board decided to allow a 120-day comment period for both Exposure Drafts. The Board also decided that the target effective date for both Statements would be for annual periods beginning on or after December 15, 2006.

Fair value measurement. The Board continued redeliberations of the Exposure Draft, Fair Value Measurements, focusing on issues relating to the scope of the final Statement, block measurements, and disclosures. The Board reached the following decisions:

  1. The Board decided to include in the scope of the final Statement, FASB Statement No. 13, Accounting for Leases, and other pronouncements that address leasing transactions and FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan.
  2. The Board decided that the fair value of large positions of unrestricted securities that trade in active markets (blocks) should be measured within Level 1 of the fair value hierarchy as the product of the quoted price times the quantity held, except as follows. The Board decided that the fair value of a block held by a broker-dealer that both buys and sells in blocks as part of its regular, ongoing business activities may be measured within a lower level of the fair value hierarchy using a blockage factor, subject to further discussion of disclosures. The Board discussed disclosures relating to an entity's policies for defining and measuring blocks, fair value amounts measured as the product of the quoted price times the quantity held, and information about gains or losses, if any, on the sale of securities that are initially acquired and held in a block but that are not sold in a block. Further discussion of disclosures is planned for a future Board meeting.
  3. The Board revised aspects of the proposed disclosure requirements as follows:
    1. For each major category of assets and liabilities remeasured at fair value during the period, the disclosures should segregate fair value amounts into three disclosure levels, that is, fair value amounts at the end of the period determined using quoted prices for identical assets or liabilities (Level 1), other market information (Level 2 and Level 3), and entity information (Level 4), and include information about the valuation techniques used. The Board eliminated the related guidance in paragraph 8 of the Exposure Draft, which would have required that those valuation techniques be consistently applied. Instead, the Board decided to emphasize the valuation objective, that is, to use the valuation technique(s) that provide the best estimate of fair value in the circumstances.
    2. Total gains or losses (unrealized and realized) should be disclosed for each major category of assets and liabilities remeasured at fair value during the period, segregating amounts included in earnings and in other comprehensive income. Unrealized gains or losses related to those assets and liabilities still held at the reporting date should be separately disclosed for each disclosure level other than Level 1 whenever that information is available.
    3. Quantitative disclosures using a tabular format are required for interim and annual periods. Other disclosures (for example, information about the valuation techniques used) are required for annual periods only.
    4. The fair value information disclosed under the final Statement should include the fair value information disclosed under FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, and other pronouncements in the periods in which those disclosures are required, if practicable.




An open meeting of the joint international group on performance reporting will take place on June 14, 2005, at Le Parker Meridien, New York, NY. The agenda will be posted to the FASB website closer to the meeting date. If you would like to attend this meeting as an observer, please complete an observer registration form, which is available on the FASB website at


The following is a list of open meetings tentatively scheduled through June. 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, May 18, 2005—FASB Board Meeting
Wednesday, May 18, 2005—FASB Education Session
Tuesday, May 24, 2005—Equipment Leasing Association of America Liaison Meeting
Wednesday, May 25, 2005—FASB Board Meeting
Wednesday, May 25, 2005—FASB Education Session
Wednesday, June 1, 2005—FASB Board Meeting
Wednesday, June 1, 2005—FASB Education Session
Wednesday, June 8, 2005—FASB Board Meeting
Wednesday, June 8, 2005—FASB Education Session
Friday, June 10, 2005—Liaison Meeting with Financial Executives International, Stamford, CT
Tuesday, June 14, 2005—Joint International Group Meeting on Performance Reporting, New York, NY
Wednesday, June 15, 2005—Board Meeting
Wednesday, June 15, 2005—FASB Education Session
Wednesday, June 15, 2005—p.m. Emerging Issues Task Force Meeting
Thursday, June 16, 2005—Emerging Issues Task Force Meeting
Tuesday, June 21, 2005—Financial Accounting Standards Advisory Council
Wednesday, June 22, 2005—Small Business Advisory Council
Thursday, June 23, 2005—FASB Education Session
Wednesday, June 29, 2005—FASB Board Meeting
Wednesday, June 29, 2005—FASB Education Session