Action Alert No. 05-22
June 2, 2005


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

Wednesday, June 8, 2005, 9:00 a.m.

  1. Liability extinguishment. The Board will discuss rights and obligations associated with enforceable one-sided offers to sell goods and whether those rights and obligations satisfy recognition criteria. (Estimated 60-minute discussion.)

  2. Stable value investments. The Board will discuss remaining issues related to a draft of a proposed FSP that describes the limited circumstances in which contract value accounting is appropriate for fully benefit-responsive investment contracts held by an investment company. (Estimated 60-minute discussion.)

  3. Financial guarantee insurance. The Board will discuss whether to add a project to its agenda addressing the accounting for financial guarantee insurance. If the project is added to the agenda, the Board will discuss the project’s potential scope. (Estimated 60-minute discussion.)

  4. 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.


Wednesday, June 8, 2005 following the Board meeting

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the June 15, 2005 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education sessions.


Friday, June 10, 2005, 8:30 a.m.

The Stamford Marriott
Two Stamford Forum
Stamford, Connecticut

The Board will meet with representatives of the Financial Executives International Committee on Corporate Reporting 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.

May 25, 2005 Board Meeting

Conceptual framework. The Board continued its deliberations on its joint IASB/FASB project. The Board discussed issues relating to some of the qualitative characteristics of accounting information and reached the following conclusions, which are generally consistent with the present frameworks except as noted:

  1. Relevance is an essential qualitative characteristic. To be relevant, information must be capable of making a difference in the economic decisions of users by helping them evaluate the effect of past and present events on future net cash inflows (predictive value) or confirm or correct previous evaluations (confirmatory value), even if it is not now being used. Being “capable of making a difference,” rather than now being used, is a change from the present IASB framework; “confirmatory” rather than “feedback” value is a change from the present FASB framework. Also, the information must be available when the users need it (timeliness).

  2. Accounting information has predictive value if users use it, or could use it, to make predictions. Accounting information is not intended in itself as a prediction, nor as synonymous with statistical predictability or persistence.

  3. Faithful representation of real-world economic phenomena is an essential qualitative characteristic, which includes capturing the substance of those economic phenomena. Faithful representation also includes the quality of completeness. The common conceptual framework will need to discuss thoroughly what faithful representation means, and what it does not mean.

  4. Financial information needs to be neutral—free from bias intended to influence a decision or outcome. To that end, the common conceptual framework should not include conservatism or prudence among the desirable qualitative characteristics of accounting information. However, the framework should note the continuing need to be careful in the face of uncertainty.

  5. Financial information needs to be verifiable to provide assurance to users that the information faithfully represents what it purports to represent and that the information is free from material error, complete, and neutral. Descriptions and measures that can be directly verified through consensus among observers are preferable to descriptions or measures that can only be indirectly verified.

  6. Representations are faithful—there is correspondence or agreement between the accounting measures or descriptions in financial reports and the economic phenomena they purport to represent—when the measures and descriptions are verifiable and the measuring or describing is done in a neutral manner. Therefore, faithful representation requires completeness, not subordinating substance to form, verifiability, and neutrality. Consequently, the common framework should drop the widely misinterpreted term reliability from the qualitative characteristics, replacing it with faithful representation. That replacement is a change from the current IASB and FASB frameworks.

  7. Although empirical research may provide evidence useful in standard-setting decisions, for example, in assessing trade-offs between desirable qualities, the conceptual framework project should not seek to develop empirical measures of faithful representation or its component qualities.

Financial performance reporting by business enterprises. The Board considered but decided not to amend FASB Statement No. 128, Earnings per Share, as a consequence of its decision to require presentation of a single statement of earnings and comprehensive income. The Board confirmed that:

  1. Presentation of basic and diluted earnings per share on the face of the statement of earnings and comprehensive income will continue to be required (paragraph 36 of Statement 128).

  2. Disclosure of basic and diluted comprehensive income per share in notes to financial statements will continue to be permitted but not required (paragraph 37 of Statement 128).

  3. Disclosure of the weighted average number of shares used as the denominator in calculating per share metrics in the notes to financial statements will continue to be required (paragraph 40(a) of Statement 128).


The following final FASB documents were issued in May 2005 and are available on the FASB website:

FASB Statement No. 154, Accounting Changes and Error Corrections. Copies of Statement 154 also will be available from the FASB Order Department by calling 1-800-748-0659.

FSP EITF 00-19-1, “Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation.”


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.

Tuesday, June 14, 2005—Joint International Group Meeting on Performance Reporting, New York, NY
Wednesday, June 15, 2005—FASB 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
Friday, June 17, 2005—FASB Education Session
Tuesday, June 21, 2005—Financial Accounting Standards Advisory Council
Wednesday, June 22, 2005—Small Business Advisory Committee
Wednesday, June 22, 2005—p.m. FASB Board Meeting
Thursday, June 23, 2005—FASB Education Session
Wednesday, June 29, 2005—FASB Board Meeting
Wednesday, June 29, 2005—FASB Education Session