Action Alert No. 07-21
May 24, 2007


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

Wednesday, May 30, 2007, 8:30 a.m.

The Board meeting will begin at 8:30 a.m. instead of 9:00 a.m.

  1. Statement 140 implementation: transfers of financial assets and repurchase financing agreements (estimated 90-minute discussion). The Board will discuss the following:

    1. Initial feedback received on the passive asset/liability (PAL) model. The discussion will include consideration of the staff’s research on a linked-presentation model as an alternative to the PAL model. The Board will consider whether a linked-presentation model should be further researched as a replacement of the qualifying special-purpose entity concept that currently exists in FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and, if so, whether the linked-presentation model should provide an alternative derecognition threshold for transactions that restrict the transferee’s right to pledge or exchange the assets it receives.

    2. Effective date and transition guidance for the proposed FSP on accounting for transfers and repurchase financing transactions.

  2. Agenda decision: going concern and liquidation basis of accounting (estimated 60-minute discussion). The Board will discuss whether to add a project to its agenda on an entity’s assessment of its ability to continue as a going concern and the adoption of a liquidation basis of accounting. The Board will address whether the standard should converge with international accounting standards, codify only existing guidance prescribed in U.S. auditing standards, or be some combination of the two.

  3. Subsequent events (estimated 60-minute discussion). The Board will discuss issues that should be addressed in this project to establish general standards of accounting for and reporting of events that occur subsequent to the balance sheet date that would replace existing requirements that are currently contained in the auditing literature. The Board also will discuss the appropriate date through which subsequent events should be considered for adjustment to or disclosure in the financial statements and how conflicts between existing accounting literature and the subsequent events concepts in the current auditing literature should be addressed.

  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, May 30, 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.


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, FSP, or Statement 133 Implementation Issue.

May 16, 2007 Board Meeting

Financial statement presentation. The Board discussed (1) the presentation of liquidity information and (2) classification issues related to diversified entities, including issues related to segment reporting.

Presentation of Liquidity Information

The Board decided to revise the working principle related to presenting information about the liquidity of an entity’s assets and liabilities to read as follows:

Financial statements should present information in a manner that helps a user assess an entity’s ability to meet its financial commitments as they come due and to invest in business opportunities. An entity’s ability to meet its existing financial commitments includes, but is not limited to, its ability to use existing assets and to raise capital. An entity’s financial commitments include those related to operations, financing, and equity holders.

In applying that working principle, the Board decided that:

  1. Entities that are not financial institutions should present a classified statement of financial position.

  2. Entities that are financial institutions (such as banks, investment banks, and insurance companies) should present a detailed maturity schedule for short-term contractual assets and liabilities.

  3. All entities should present a maturity schedule for long-term contractual assets and liabilities.

  4. All entities should disclose the following capital management information:

    1. Qualitative information about an entity’s objectives, policies, and processes for managing capital, including (but not limited to):

        (1)   A description of what it manages as capital

        (2)   When an entity is subject to externally imposed capital requirements, the nature of those requirements, and how those requirements are incorporated into the management of capital

        (3)   How it is meeting its objectives for managing capital.

    2. Summary quantitative data about what an entity manages as capital.

    3. Any changes in the above qualitative and quantitative data from the previous period.

    4. Whether during the period an entity complied with any externally imposed capital requirements to which it is subject.

    5. When the entity has not complied with such externally imposed capital requirements, the consequences of such noncompliance.

Classification Issues Related to Diversified Entities and Segment Reporting

The Board decided that a consolidated reporting entity consisting of significantly different businesses (a diversified entity) should apply the classification criteria to its assets and liabilities at the reportable segment level (as that term is defined in FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information). The Board expressed the preliminary view that the segment disclosure requirements in Statement 131 should be replaced with a requirement to disclose operating and financing category information (at a minimum) for each reportable segment for each primary financial statement (that is, the statements of financial position, comprehensive income, and cash flows). Assets and liabilities that are managed by a reportable segment would be allocated to that segment and measured on a basis consistent with the amounts reported in the consolidated financial statements.

Statement 133 Implementation Issue—clarification of the application of the shortcut method. The Board decided to add an additional issue to the proposed Statement 133 Implementation Issue on the application of the shortcut method. The additional guidance will address the interaction between FASB Statement No. 157, Fair Value Measurements, and paragraph 68(b) of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Specifically, interest rate swaps entered into with an initial transaction price of zero and on “at-market” terms would not violate paragraph 68(b) if their fair value was at a value other than zero due to the existence of a bid-ask spread in their primary market.

The Board authorized the staff to proceed to a draft of a proposed Statement 133 Implementation Issue for vote by written ballot.


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.

Friday, June 8, 2007—Liaison Meeting with Financial Executives International, Stamford, CT
Friday, June 8, 2007—FASB Education Session
Tuesday, June 12, 2007—Investors Technical Advisory Committee Meeting
Wednesday, June 13, 2007—FASB Board Meeting
Wednesday, June 13, 2007—FASB Education Session
Thursday, June 14, 2007—Emerging Issues Task Force Meeting
Tuesday, June 19, 2007—Financial Accounting Standards Advisory Council Meeting
Wednesday, June 20, 2007—Small Business Advisory Committee Meeting
Thursday, June 21, 2007—FASB Board Meeting
Thursday, June 21, 2007—FASB Education Session
Wednesday, June 27, 2007—FASB Board Meeting
Wednesday, June 27, 2007—FASB Education Session
Thursday, July 5, 2007—FASB Education Session
Wednesday, July 11, 2007—FASB Board Meeting
Wednesday, July 11, 2007—FASB Education Session
Wednesday, July 18, 2007—FASB Board Meeting
Wednesday, July 18, 2007—FASB Education Session
Wednesday, July 25, 2007—FASB Board Meeting
Wednesday, July 25, 2007—FASB Education Session