Action Alert No. 07-17
April 26, 2007
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)
Wednesday, May 2, 2007, 9:00 a.m.
- Conceptual framework: qualitative characteristics (estimated 90-minute discussion). The Board will begin redeliberations on Chapter 2 of the Preliminary Views, Conceptual Framework for Financial Reporting: Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information.
- Derivative disclosures (estimated 60-minute discussion). The Board will begin redeliberations of and discuss the comments received on the Exposure Draft, Disclosures about Derivative Instruments and Hedging Activities.
- 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
Wednesday, May 2, 2007, following the Board meeting
The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at a future Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.
OPEN ROUNDTABLE DISCUSSION WITH RESPONDENTS TO THE FASB INVITATION TO COMMENT ON VALUATION GUIDANCE FOR FINANCIAL REPORTING
(This meeting is available by audio webcast and telephone.)
Monday, April 30, 2007, 1:00 p.m. 4:00 p.m.
The Board will hold a public roundtable discussion to listen to the views of and obtain information from respondents to the January 15, 2007, FASB Invitation to Comment, Valuation Guidance for Financial Reporting.
OPEN MEETING OF THE FINANCIAL ACCOUNTING STANDARDS BOARD’S USER ADVISORY COUNCIL
Tuesday, May 1, 2007, 9:00 a.m.
New York Marriott East Side
525 Lexington Avenue
New York, New York
The Board and the User Advisory Council will meet to discuss the following:
- Distinguishing between liabilities and equity
- Derivatives and hedging issues.
The User Advisory Council will hear reports on the FASB’s research initiatives and the activities of the Investors Technical Advisory Committee. The agenda is subject to change.
Closed to Public Observation
The User Advisory Council will hold a closed session with the Board to discuss administrative matters. The public portion of the meeting is expected to end at approximately 1:00 p.m.
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, Interpretation, or FSP.
April 18, 2007 Board Meeting
Business combinations. The Board continued redeliberations of its June 2005 Exposure Drafts, Business Combinations, and Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests in Subsidiaries.
- The Board affirmed that the measurement attribute in a business combination should be fair value. FASB Statement No. 157, Fair Value Measurements, provides the definition of fair value and the related guidance for measuring fair value.
- The Board discussed the circumstances in which an acquirer should reclassify or redesignate an acquired contract, asset, or liability. The Board affirmed the guidance that currently exists in other standards for classification or designation. If no guidance exists, the Board affirmed the accounting that is typically occurring in practice.
- The Board decided that classifications and designations based on management’s intentions should be reassessed at the acquisition date. For example, an acquirer would classify or designate the following in accordance with its policies and intentions:
(1) Trading, available-for-sale, or held-to-maturity financial instruments accounted for in accordance with FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. (Thus, the Board affirmed the guidance in Statement 115.)
(2) Assets held for sale accounted for in accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. (Thus, the Board clarified the accounting in Statement 144.)
(3) Hedging relationships accounted for in accordance with FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. (Thus, the Board affirmed the guidance in Statement 133.)
- The Board affirmed the guidance in Statement 133 that requires an evaluation of embedded derivatives for separation from the host contract based on the terms and conditions at the acquisition date.
- The Board affirmed the guidance in FASB Interpretation No. 21, Accounting for Leases in a Business Combination, that requires the acquirer to carry over the acquiree’s lease classification unless the terms of the lease contract are substantively modified.
- The Board clarified that an acquirer classifies an insurance contract based on the terms and conditions that existed at its inception unless the terms of the insurance contract are substantively modified as part of the business combination.
- With respect to disclosures for the final business combinations Statement, the Board generally affirmed the disclosures that were proposed in the Exposure Draft, with minor clarifications. The Board also decided that for the pro forma disclosures, an acquirer should disclose revenues and net income rather than results of operations, as was proposed in the Exposure Draft. This decision converges with the IASB’s decisions. (The Exposure Draft defined results of operations as revenue, income before extraordinary items, cumulative effect of accounting changes, net income, and earnings per share.)
- The Board decided that the final Statements should be effective for annual periods beginning on or after December 15, 2008. An entity will be prohibited from adopting the Statements before their effective dates.
- With respect to the guidance in paragraph 36(b)(2) of the business combinations Exposure Draft on accounting for insurance contracts acquired in a business combination after initial recognition, the Board:
- Decided to provide only high-level supplemental guidance instead of addressing the detail issues previously discussed (other than the editorial concerns). This guidance will be limited to the notion that insurance contracts acquired in a business combination should be considered by the acquiree as new contracts for measurement and accounting purposes. However, reassessment of the classification of those contracts as insurance or deposit contracts (that is, evaluating whether the contracts transfer significant insurance risk) will not be required unless the terms of the contracts were altered substantively in the business combination.
- Decided to limit the scope of the contracts that fall within that guidance to contracts that are accounted for as insurance (or reinsurance) contracts. For example, noninsurance contracts providing for third-party contingent commissions or claims liability adequacy guarantees should be accounted for like other business combination contingencies.
Agenda decision: discontinued operations. The Board decided that the guidance on reporting a discontinued operation and the additional disclosures for components that have been or will be disposed of should be separated from the Board’s project on financial statement presentation. Therefore, the Board added this project to its agenda as a separate project. The Board indicated that it likely would not complete this separate project before the end of the exposure period on the expected Preliminary Views on financial statement presentation.
Amendment to FASB Interpretation No. 39. The Board discussed the comment letters received on proposed FSP FIN 39-a, “Amendment of FASB Interpretation No. 39,” and whether to issue the FSP as final. The Board decided to permit entities to offset cash collateral receivables or payables that approximate fair value with net derivative positions. The Board also decided that the final FSP will be effective for fiscal years beginning after November 15, 2007, with early adoption permitted. The Board directed the staff to proceed to a draft of the final FSP for vote by written ballot.
Open discussion: financial guarantee insurance. The Board discussed a change to the exposure period for the Exposure Draft, Accounting for Financial Guarantee Insurance Contracts, which had originally been set at 90 days to accommodate the year-end financial reporting responsibilities of constituents that will be affected by the proposed Statement. Due to the timing of the anticipated exposure falling subsequent to year-end financial reporting, the Board decided that the exposure period should be changed from 90 days to 60 days and end mid-June 2007.
FUTURE OPEN MEETINGS
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, May 8, 2007FASB Board Meeting
Tuesday, May 8, 2007FASB Education Session
Wednesday, May 16, 2007FASB Board Meeting
Wednesday, May 16, 2007FASB Education Session
Wednesday, May 23, 2007FASB Board Meeting
Wednesday, May 23, 2007FASB Education Session
Wednesday, May 30, 2007FASB Board Meeting
Wednesday, May 30, 2007FASB Education Session
Friday, June 8, 2007Liaison Meeting with Financial Executives International, Stamford, CT
Friday, June 8, 2007FASB Education Session
Tuesday, June 12, 2007Investors Technical Advisory Committee Meeting
Wednesday, June 13, 2007FASB Board Meeting
Wednesday, June 13, 2007FASB Education Session
Thursday, June 14, 2007Emerging Issues Task Force Meeting
Tuesday, June 19, 2007Financial Accounting Standards Advisory Council Meeting
Wednesday, June 20, 2007Small Business Advisory Committee Meeting
Thursday, June 21, 2007FASB Board Meeting
Thursday, June 21, 2007FASB Education Session
Wednesday, June 27, 2007FASB Board Meeting
Wednesday, June 27, 2007FASB Education Session