Action Alert No. 07-20
May 17, 2007


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

Wednesday, May 23, 2007, 9:00 a.m.

  1. Agenda decision: hybrid financial instruments (estimated 45-minute discussion). The Board will discuss whether to add a project to its agenda on determining the nature of a host contract related to a hybrid financial instrument issued in the form of a share under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and, if so, the objective, scope, and timing of such a project.

  2. Agenda decision: Statement 133 hedging implementation (estimated 60-minute discussion). The Board will discuss (a) practice issues related to the hedge accounting guidance in Statement 133 and (b) whether to add a project to its agenda to address the accounting for hedging activities. If the Board decides to add a project to the agenda, it also will discuss potential approaches for accounting for hedging activities.

  3. 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 23, 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 8, 2007 Board Meeting

Financial instruments: liabilities and equity. The Board discussed how an entity applying the ownership-settlement approach would report the issuance of a direct ownership instrument upon the exercise, conversion, or settlement of an indirect ownership instrument. The Board decided the entity would measure the direct ownership instrument issued at fair value at the issuance date. The difference between the fair value of the direct ownership instrument issued and the carrying value of the indirect ownership instrument should be displayed in the statement of changes in equity as a transfer between the indirect ownership instrument and the direct ownership instrument issued.

The Board also discussed the three approaches (ownership, ownership-settlement, or reassessed expected outcomes) to classifying financial instruments with characteristics of liabilities and equities and reached a preliminary view that entities should make those classification decisions using the ownership approach.

Transfers of financial assets. The Board discussed how to apply FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to transactions involving a transfer of a financial asset and a repurchase financing of that asset that involve the same parties to the initial transfer. The Board decided to address the issue by providing guidance in the form of an FASB Staff Position that would permit a transferee and transferor to evaluate the accounting for the transactions separately under Statement 140 in certain circumstances.

Conceptual framework: reporting entity. The Board discussed outstanding issues related to the reporting entity phase of the conceptual framework project (Phase D). The Board decided the following:

  1. The composition of a group entity should be based on control. Typically, a group would comprise a parent and other entities under its control. In addition, there might be occasions when general purpose external financial reports may be prepared for a group of entities under common control, such as combined financial statements for two or more entities under the control of a single investor.

  2. A parent entity may have only one set of general purpose financial statements, which are its consolidated financial statements that present information about all of the assets and liabilities and activities of the parent and its subsidiaries. The Board acknowledged that, generally, it is more useful to present information about the assets and liabilities and activities of subsidiaries in a disaggregated form, but there may be certain circumstances in which aggregated (one-line) summary information is more decision useful. Those circumstances would be addressed at the standards level.

The Board directed the staff to proceed with drafting a Preliminary Views on the reporting entity concept that reflects the FASB's and IASB's most recent decisions after the IASB discusses the remaining issues at its meeting on May 16, 2007.


Final FSP FIN 46(R)-7, "Application of FASB Interpretation No. 46(R) to Investment Companies," was issued on May 11, 2007, and is available on the FASB website.


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, May 30, 2007—FASB Board Meeting
Wednesday, May 30, 2007—FASB Education Session
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