Revised 06/10/05—See below

Action Alert No. 05-23
June 9, 2005


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

Wednesday, June 15, 2005, 9:00 a.m.

  1. Short-term international convergence: income taxes. The Board will discuss whether to modify the existing disclosure requirements in FASB Statement No. 109, Accounting for Income Taxes, to eliminate differences between those requirements and the disclosures required under IAS 12, Income Taxes. (Estimated 45-minute discussion.)

  2. Warrants for redeemable shares. The Board will discuss comment letters received on proposed FASB Staff Position (FSP) FAS 150-e, “Issuer’s Accounting under Statement 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable,” to clarify the applicability 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,” to warrants on redeemable shares. (Estimated 30-minute discussion.)

  3. Interpretation of paragraph 40(b) of Statement 140. The Board will consider whether to add a project to its agenda to clarify the accounting guidance provided in paragraph 40(b) of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, relative to the notional amount of passive derivative instruments held by qualifying special-purpose entities. (Estimated 60-minute discussion.)

  4. Qualifying special-purpose entities and isolation of transferred assets. [Revised 06/10/05: This topic was added to the agenda.] The Board will discuss amending Statement 140 to allow qualifying special-purpose entities to hold and issue passive derivative financial instruments that pertain to all beneficial interests issued (including those that are subsequently purchased by the transferor, its affiliates, or its agents). (Estimated 30-minute discussion.)

  5. 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 15, 2005, following the Board meeting
Friday, June 17, 2005, 9:00 a.m.

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the June 22, 2005, and June 29 Board meetings. Those topics will be posted to the FASB calendar four days prior to the education sessions.


Tuesday, June 14, 2005, 8:30 a.m.

Le Parker Meridien
118 West 57th Street
New York, New York

The FASB and IASB will meet with members of the Joint International Group (JIG) on Performance Reporting. The meeting will include:

  1. Presentations by JIG members on "What Does Net Income Mean?"

  2. An update on decisions reached by the FASB and IASB Boards at their April and May meetings.

  3. An open discussion of differing methods that might be used to categorize information presented in the statement of earnings and comprehensive income.

Further information about this meeting is available on the FASB website.

(This meeting is available by audio webcast and telephone.)

Wednesday, June 15, 2005, 1:00 p.m. – 5:30 p.m.
Thursday, June 16, 2005, 8:00 a.m. – 4:30 p.m.

The task force plans to discuss all of the following issues in the order shown (the task force plans to discuss the first three issues on Wednesday and to begin discussions on Thursday with Issue 04-5):

  1. Issue No. 05-4, "The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock'"

  2. Issue No. 05-2, "The Meaning of 'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, 'Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock'"

  3. Issue No. 05-1, "Accounting for the Conversion of an Instrument That Becomes Convertible upon the Issuer's Exercise of a Call Option"

  4. Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights"

  5. Issue No. 05-3, "Accounting for Rental Costs Incurred during the Construction Period"

  6. Issue No. 05-6, "Determining the Amortization Period for Leasehold Improvements"

  7. Issue No. 04-13, "Accounting for Purchases and Sales of Inventory with the Same Counterparty"

  8. Issue No. 05-5, "Accounting for the Altersteilzeit Early Retirement Programs and Similar Type Arrangements."


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.

June 1, 2005 Board Meeting

Issuer credit standing and fair value remeasurements. The Board discussed but did not reach a decision on whether to add a project to its agenda to amend FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to allow for situations in which changes in an issuer’s own creditworthiness might be excluded from subsequent remeasurements of derivative liabilities at fair value. The Board asked the staff to further research related issues as a basis for considering those issues more broadly, in conjunction with its fair value option project.

Fair value option. The Board was unable to reach an agreement on whether to curtail a debtor’s recognizing in earnings the effect of changes in its credit worthiness in reporting liabilities at fair value when the fair value option has been elected. The Board directed the staff to perform further research on the subject and present that research to the Board at a later date.

Measuring fair value of certain derivative contracts under Statement 133. The Board decided to add a project to its agenda and issue an FSP relating to derivative contracts that are marked-to market under Statement 133. The project will reconsider the guidance in EITF Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities,” in the context of the guidance developed to date in its fair value measurement project. The Board discussed but did not reach any decisions on the project issues. The Board plans to discuss those issues at a future meeting.

Fair value measurements. The Board continued redeliberations of the FASB Exposure Draft, Fair Value Measurements, focusing on issues relating to blocks and disclosures.

The Board reconsidered its previous decision to allow a broker-dealer to use a blockage factor to estimate the fair value of a large position of an unrestricted security with a quoted price in an active market (block). Instead, the Board decided to preclude the use of a blockage factor in all cases. Accordingly, a quoted price in an active market should be used to estimate the fair value of an unrestricted security within Level 1 of the fair value hierarchy, even if an entity (including a broker-dealer or an investment company) holds a large position of the security. A final Statement will make a conforming change to the AICPA Audit and Accounting Guides for broker-dealers and investment companies.

The Board decided that disclosure of unrealized gains or losses relating to assets and liabilities still held at the reporting date should be limited to those assets and liabilities that are remeasured at fair value within the lowest level of the fair value hierarchy. That limited disclosure would be required in all cases. The Board affirmed its earlier decision to also require disclosure of total gains or losses (unrealized and realized) for assets and liabilities held during the period (whether or not those assets and liabilities are still held at the reporting date) and to segregate those gains or losses included in earnings and in accumulated other comprehensive income.

Other comprehensive income upon the loss of significant influence. The Board discussed the following issues raised in comment letters on proposed FSP APB 18-a, “Accounting by an Investor for Its Proportionate Share of Other Comprehensive Income of an Investee Accounted for under the Equity Method in Accordance with APB Opinion No. 18 upon a Loss of Significant Influence”:

  1. Agreed that the proposed FSP is not inconsistent with subparagraph 19(l) of APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock.

  2. Agreed that the proposed FSP is not inconsistent with paragraph 376 of Statement 133.

  3. Agreed that the second and third sentences of paragraph 4 of the proposed FSP should be removed because they are inconsistent with subparagraph 19(m) of Opinion 18.

  4. Agreed that any amount of an investor’s proportionate share of an investee’s equity adjustments for other comprehensive income that remain after reducing the carrying amount of the investment to zero should be recorded in periodic income.

The Board directed the staff to proceed to a draft of a final FSP for vote by written ballot.


The following FSPs were issued and are available on the FASB website:

Final FSP FAS 143-1, “Accounting for Electronic Equipment Waste Obligations” (June 8, 2005).

Proposed FSP FIN 45-b, “Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owner” (June 9, 2005). Comments are requested by August 8, 2005.


The following is a list of open meetings tentatively scheduled through July. 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 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
Wednesday, July 6, 2005—FASB Board Meeting
Wednesday, July 6, 2005—FASB Education Session
Wednesday, July 13, 2005—FASB Board Meeting
Wednesday, July 13, 2005—FASB Education Session
Wednesday, July 20, 2005—FASB Board Meeting
Wednesday, July 20, 2005—FASB Education Session
Monday, July 25, 2005—Liaison Meeting with the Edison Electric Institute
Wednesday, July 27, 2005—FASB Board Meeting
Wednesday, July 27, 2005—FASB Board Meeting