Action Alert No. 07-18
May 3, 2007


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

Tuesday, May 8, 2007, 9:00 a.m.

The Board meeting will be held on Tuesday instead of Wednesday.

  1. Financial instruments: liabilities and equity (estimated 45-minute discussion). The Board will discuss (a) how to report issuance of direct ownership instruments upon exercise, conversion, or settlement of indirect ownership instruments classified as equity under the ownership-settlement approach and (b) its preferred accounting approach (ownership-settlement, ownership, or reassessed expected outcomes), which will be discussed in the forthcoming liabilities and equity preliminary views document.

  2. Transfers of financial assets (estimated 60-minute discussion). The Board will discuss whether to provide guidance for the accounting for a transaction involving a transfer of a financial asset and a repurchase financing of that asset that involves the same parties to the initial transfer.

  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.

Tuesday, May 8, 2007, 3:00 p.m.

Conceptual framework: reporting entity (estimated 90-minute discussion). The staff will report on progress made on the definition of a reporting entity and related concepts and views of individual members of the FASB and the IASB. The Board will discuss those views and determine whether there is agreement to proceed to publication of an initial discussion document.


Tuesday, May 8, 2007, following the 9:00 a.m. 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, or FSP.

April 23, 2007 FASB/IASB Joint Board Meeting

Intangible assets. The Memorandum of Understanding between the FASB and the IASB indicates that the Boards will decide the scope and timing of a project on intangible assets by December 2007. At this meeting, the Boards considered a staff draft of an agenda proposal. The Boards agreed that the proposal formed an appropriate basis for developing a final proposal to facilitate agenda decisions of both Boards. The Boards agreed that the scope of the proposal should:

  1. Include the initial accounting for identifiable intangible assets other than those acquired in a business combination (with a particular focus on, but not limited to, internally generated identifiable intangible assets)

  2. Include the subsequent accounting for all identifiable intangible assets

  3. Exclude the initial and subsequent accounting for goodwill.

Financial instruments: liabilities and equity. A representative from the European Financial Reporting Advisory Group presented to the Boards an alternative approach for distinguishing between liabilities and equity. This approach (referred to as the Loss Absorption Approach) classifies instruments or components of instruments as equity if an instrument’s claim on net assets is reduced if the entity incurs a loss. The meeting was informational; no decisions were reached.

Conceptual framework: measurement. The Boards continued to discuss issues related to milestone I of the measurement phase (phase C). These issues mainly deal with the following primary measurement basis candidates that will be evaluated in milestone II and how they are defined in relation to assets and liabilities:

  1. Past entry price

  2. Modified past entry amount

  3. Past exit price

  4. Current entry price

  5. Current exit price

  6. Current equilibrium price

  7. Value in use

  8. Future entry price

  9. Future exit price.

The Boards generally accepted the staff recommendations for milestone I issues. The consideration of milestone II is planned to begin shortly. As previously agreed, the staff will prepare a summary of milestone I decisions for posting to the Boards’ websites. The summary will incorporate refinements suggested in this meeting and provide an easily accessible source for the status of the measurement phase of the conceptual framework project as the Boards proceed to the next milestone.

Conceptual framework. The Boards discussed the overall project status, plans, priorities, and processes, and directed the staff as follows:

  1. To continue to focus on the near-term priorities and completion of work on the first four phases of the project (objectives and qualitative characteristics, elements and recognition, measurement, and reporting entity) before beginning work on presentation and disclosure and the applicability of the conceptual framework to not-for-profit organizations.

  2. To continue coordinating work on conceptual matters with related standards-level projects so as to minimize redundant activities. The staff also should seek opportunities to use Board advisers assigned to standards-level projects to assist with issues in the conceptual framework project, so as to maximize the Boards’ overall effectiveness.

April 24, 2007 FASB/IASB Joint Board Meeting

Business combinations. The Boards discussed remaining convergence issues and a request from the staff to begin the drafting process for the final Statements on business combinations and noncontrolling interests.

  1. The Boards discussed and reached convergence on the following issues for which the Boards had reached different conclusions in redeliberations:

    1. The IASB decided to converge with the FASB and require that an acquirer measure and recognize an asset subject to an operating lease at its acquisition date fair value without considering the terms of the operating lease. If the terms of an operating lease are favorable (unfavorable) relative to market terms as of the acquisition date, the acquirer would recognize an intangible asset (liability) separately from the asset subject to the operating lease.

    2. The FASB decided to converge with the IASB and retain the guidance in paragraph 32 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, that allows an acquirer to classify long-lived assets as held for sale if the sale is expected to be completed within one year and the other criteria in Statement 144 are probable of being met within a short period from the acquisition date (usually within three months). That guidance is similar to the guidance in IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

    3. The Boards decided that if, in a business combination, an acquirer assumes a liability but requires the former owners of the acquiree to reimburse the acquirer if and when the acquirer pays the liability, the acquirer should recognize the asset for the reimbursement (indemnification) at the same amount as the related assumed liability.

    4. FASB Statement No. 141, Business Combinations, allows an acquirer to designate as the effective date the end of an accounting period between the date the business combination is initiated and the date the business combination is consummated. The Boards agreed that the final business combinations Statement should not retain that guidance.

    5. The FASB agreed to adopt the approach preferred by the IASB and include a principle in the final business combinations Statement that an acquirer should classify or designate the assets, liabilities, and equity instruments acquired or assumed based on the conditions that exist at the acquisition date. The Boards agreed that leases and insurance contracts acquired in a business combination are exceptions to that principle and should be classified based on the terms and conditions that existed at their inception (or at the date of the last substantive modification).

  2. The Boards did not reach convergence on the measurement of noncontrolling interests in a business combination. The FASB decided to require that noncontrolling interests be measured at fair value at the acquisition date. The IASB decided to permit an acquirer to measure noncontrolling interests at fair value or as its proportionate interest in the acquiree’s identifiable net assets on an acquisition-by-acquisition basis. The Boards decided that while they would have preferred to have a converged measurement attribute for noncontrolling interests, they agreed that the final Statements will substantially converge the accounting for business combinations.

  3. The Boards discussed the costs and benefits of the final Statements and agreed that the benefits of the improved accounting that will result from the final Statements outweigh the costs of compliance. The Boards also agreed that there are no issues that would cause the Boards to reexpose either proposed Statement, since all of the changes made during redeliberations were in response to comments from respondents and will make the Statements easier for preparers to implement. Therefore, the Boards directed the staff to proceed to drafts of final business combinations and final noncontrolling interests Statements.

Accounting for leases. The Boards discussed the scope of the leases project and concluded that the project should initially focus on accounting for those arrangements within the scope of existing lease accounting literature. As the project progresses and before publishing a preliminary views document, the Boards will consider whether to extend the scope of the project to other arrangements that convey a right to use another entity’s asset.


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

Final FSP FIN 39-1, "Amendment of FASB Interpretation No. 39" (April 30, 2007)

Final FSP FIN 48-1, "Definition of Settlement in FASB Interpretation No. 48" (May 2, 2007).


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.

Wednesday, May 16, 2007—FASB Board Meeting
Wednesday, May 16, 2007—FASB Education Session
Wednesday, May 23, 2007—FASB Board Meeting
Wednesday, May 23, 2007—FASB Education Session
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