Action Alert No. 05-25
June 23, 2005
NOTICE OF MEETINGS
OPEN BOARD MEETING
meetings are available by audio webcast and telephone.)
Wednesday, June 29, 2005, 9:00 a.m.
value measurements. The Board will continue redeliberations of
the Exposure Draft, Fair Value Measurements. The Board will
clarify certain aspects of the guidance developed to date relating to
the fair value definition and the fair value hierarchy. (Estimated
fair value of certain derivative contracts under Statement 133.
The Board will discuss issues relating to initial and subsequent
estimates of fair value of derivative instruments under 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." (Estimated 60-minute discussion.)
instruments: liabilities and equity. The Board will discuss the
definition of a multiple component instrument and possible separation
approaches. (Estimated 60-minute discussion.)
instruments: derivative implementation. The Board will discuss
comments received on proposed Statement 133 Implementation Issues No.
B39, "Application of Paragraph 13(b) to Call Options That Are
Exercisable Only by the Debtor," and No. B38, "Evaluation of Net
Settlement with Respect to the Settlement of a Debt Instrument through
Exercise of an Embedded Put Option or Call Option." (Estimated
impairment. The Board will discuss comment letters received on
proposed FASB Staff Position (FSP) EITF 03-1-a, "Implementation Guidance
for the Application of Paragraph 16 of EITF Issue No. 03-1," and whether
to proceed with a project to provide guidance on the meaning of
other-than-temporary impairment. (Estimated 60-minute
- Accounting for rental costs incurred during the construction
period. The Board will discuss whether to add a project to its
agenda that will address whether an entity may capitalize rental costs
that are incurred during the construction period and, if so, the types
of rental costs that can be capitalized. The Board will discuss whether
the guidance should be in the form of an FSP. (Estimated 60-minute
ratification of EITF consensuses. The Board will consider the
ratification of the consensuses reached at the June 15–16, 2005 Emerging
Issues Task Force meeting (see discussion under EITF ACTIONS). In
addition, the Board will consider whether to finalize proposed FSP SOP
78-9-a, "Interaction of AICPA Statement of Position 78-9 and EITF Issue
No. 04-5." A decision on that proposed FSP was postponed pending the
consensus on Issue 04-5. (Estimated 30-minute discussion.)
- 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 SESSIONS
Wednesday, June 29, 2005, following the Board meeting
June 30, 2005, 8:30 a.m.
The Board will hold educational, non-decision-making sessions to
discuss topics that are anticipated to be discussed at the July 6 and July
13, 2005 Board meetings. Those topics will be posted to the FASB calendar four
days prior to the education sessions.
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
June 15, 2005 Board Meeting
international convergence: income taxes. The Board considered
certain differences between the disclosure requirements in FASB Statement
No. 109, Accounting for Income Taxes, and IAS 12, Income
The Board decided to amend the disclosure requirements in Statement 109
- Add "any adjustments recognized in the period for current tax of
prior periods" to the list of examples of significant components of
income tax expense in paragraph 45 of Statement 109.
- Add to and expand upon the disclosure requirements in Statement 109
for the tax effects of intercompany asset transfers. The Board will
consider alternative disclosure requirements at a future meeting.
- Include the guidance in paragraphs 82A and 87A–87C of IAS 12
regarding disclosure of the potential income tax consequences of
- Add to Statement 109 a required disclosure of the tax effects of
dividends, if any, whenever entities voluntarily disclose dividends
declared subsequent to the balance sheet date in the notes to financial
The Board also considered but decided not to require additional
disclosures regarding the nature and amount of undistributed earnings of
for redeemable shares. The Board discussed comments received on
proposed FSP FAS 150-e, "Issuer’s Accounting under Statement 150 for
Freestanding Warrants and Other Similar Instruments on Shares That Are
Redeemable," and directed the staff to proceed to a draft of the final FSP
for vote by written ballot.
Interpretation of paragraph 40(b) and 40(c) of Statement 140.
The Board decided to add to its agenda a project to clarify, through the
guidance of an FSP, that the accounting guidance provided in paragraphs
40(b) and 40(c) 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
a qualifying special-purpose entity (SPE) is required to be met upon
initial establishment of the qualifying SPE only.
special-purpose entities and isolation of transferred assets. The
Board discussed a proposal to amend Statement 140 to allow qualifying SPEs
to hold passive derivative financial instruments that do not initially
exceed the amount of beneficial interests issued (including those that are
held by or subsequently purchased by the transferor, its affiliates, or
its agents) and that are not expected to exceed them subsequently.
Currently, Statement 140 limits the amount of derivatives a qualifying SPE
can hold to an amount that does not initially exceed the amount of
beneficial interests issued or sold to parties other than the transferor,
its affiliates, and its agents, and that is not expected to exceed them
subsequently. The Board concluded that the original limit would no longer
be necessary given the Board’s decisions on the measurement of hybrid
financial instruments that are included in the soon-to-be-issued Exposure
Draft on accounting for hybrid financial instruments.
June 15–16, 2005 EITF Meeting
The task force discussed the following issues:
- Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor's Products)." The Task
Force agreed to make certain changes to Exhibit 01-9F and to add a
footnote to Issue 4 to clarify the interaction between this Issue's
scope and the consensus in Issue 4 (which was reached at the November
14–15, 2001 EITF meeting). The Board will consider the ratification of
these changes at its June 29, 2005 meeting.
- 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." A consensus was
reached. Based on that consensus, the Task Force also agreed to amend
the consensus in EITF Issue No. 96-16, "Investor's Accounting for an
Investee When the Investor Has a Majority of the Voting Interest but the
Minority Shareholders Have Certain Approval or Veto Rights." The Board
will consider the ratification of the consensus and the amendment at its
June 29, 2005 meeting and will also consider whether to finalize
proposed FSP SOP 78-9-a, "Interaction of AICPA Statement of Position
78-9 and EITF Issue No. 04-5."
- Issue No. 04-6, "Accounting for Stripping Costs Incurred during
Production in the Mining Industry." The Task Force agreed to change the
transition provisions of this Issue to require entities that adopt the
consensus through a cumulative-effect adjustment to recognize any
adjustment in retained earnings (or other appropriate component of
equity or net assets). The Task Force also agreed to clarify that
"inventory produced" means "inventory extracted" in the previously
reached consensus for this Issue. The Board will consider the
ratification of these changes at its June 29, 2005 meeting.
- Issue No. 04-10, "Determining Whether to Aggregate Operating
Segments That Do Not Meet the Quantitative Thresholds." The Task Force
agreed to change the effective date of this Issue and that the consensus
should be effective for fiscal years ending after September 15, 2005.
Additionally, the corresponding information for earlier periods,
including interim periods, should be restated unless it is impractical
to do so. The Board will consider the ratification of this change at its
June 29, 2005 meeting.
- Issue No. 04-13, "Accounting for Purchases and Sales of Inventory
with the Same Counterparty." The Task Force reached several tentative
conclusions at the March 17 and June 15–16, 2005 EITF meetings and asked
the staff to prepare a draft abstract reflecting those tentative
conclusions and to post that draft abstract to the FASB website for
public comment. This Issue will be discussed further at a future
- Issue No. 05-1, "Accounting for the Conversion of an Instrument That
Becomes Convertible upon the Issuer's Exercise of a Call Option." The
Task Force discussed the previously reached tentative conclusion and
asked the FASB staff to research various alternatives for future
consideration. This Issue will be discussed further at a future meeting.
- 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.'" A consensus was reached. The Board will consider
the ratification of that consensus at its June 29, 2005 meeting.
- Issue No. 05-3, "Accounting for Rental Costs Incurred during the
Construction Period." The Task Force was unable to reach a consensus and
agreed to remove this Issue from its agenda.
- 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.'" The Task Force asked
the FASB staff to obtain additional information on how entities
currently account for registration rights agreements in practice and to
analyze the comparison between registration rights penalties and other
penalties that do not meet the definition of a derivative. This Issue
will be discussed further at a future meeting.
- Issue No. 05-5, "Accounting for the Altersteilzeit Early Retirement
Programs." A consensus was reached. The Board will consider the
ratification of that consensus at its June 29, 2005 meeting.
- Issue No. 05-6, "Determining the Amortization Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a Business
Combination." A consensus was reached. The Board will consider the
ratification of that consensus at its June 29, 2005 meeting. The Task
Force directed the FASB staff to further develop a separate issue for
EITF Agenda Committee consideration that would address whether the
amortization period for a leasehold improvement should be reevaluated
after the initial determination of the amortization period.
FASB DOCUMENT AVAILABLE
TB 85-4-a, "Accounting of Life Settlement Contracts by Investors,"
was issued on June 17, 2005, and is available on the FASB website.
Comments are requested by August 1, 2005.
FUTURE OPEN MEETINGS
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.
Wednesday, July 6, 2005—FASB Board Meeting
Wednesday, July 6,
2005—FASB Education Session
Wednesday, July 13, 2005—FASB Board
Wednesday, July 13, 2005—FASB Education Session
July 20, 2005—FASB Board Meeting
Wednesday, July 20, 2005—FASB
Monday, July 25, 2005—Liaison Meeting with the Edison
Wednesday, July 27, 2005—FASB Board
Wednesday, July 27, 2005—FASB Education Session