Action Alert No. 05-06
February 10, 2005


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

Wednesday, February 16, 2005, 9:00 a.m.

  1. Business combinations: purchase method procedures. The Board will discuss various issues identified by the staff in developing the joint FASB-IASB business combinations Exposure Draft, including whether: (Estimated 1.75-hour discussion.)

    1. To eliminate existing differences relating to the recognition of an acquirer’s deferred tax benefits as a result of a business combination

    2. The disclosure requirements can be further converged with the IASB’s proposed requirements

    3. To eliminate certain differences in the criteria for recognition of intangible assets separately from goodwill

    4. To include in the proposed Statement guidance for the subsequent accounting of reacquired intangible assets for which initial recognition guidance is provided in EITF Issue No. 04-1, "Accounting for Preexisting Relationships between the Parties to a Business Combination"

    5. The proposed Statement issued by the FASB should include implementation guidance on accounting for reverse acquisitions that is included in IFRS 3, Business Combinations, and a related nonauthoritative example illustrating the application of that guidance.

  2. Uncertain tax positions. The Board will discuss alternative recognition models for accounting for uncertain tax positions. The Board also will consider alternative thresholds. (Estimated 60-minute discussion.)

  3. Beneficial interests. The Board will consider alternatives for applying the fair value option and whether decisions reached to date in this project warrant amending paragraph 35 of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, regarding the qualified status of a special-purpose entity that contains a derivative that pertains to a beneficial interest (other than another derivative financial instrument). The Board also will consider incorporating the decision reached in this project to initially recognize at fair value interests transferor's interests in transferred assets as part of the Board’s project on qualifying special-purpose entities. (Estimated 60-minute discussion.)

  4. FASB Staff Position (FSP). The Board will discuss the comment letters received on the proposed FSP FIN 46(R)-b, "Implicit Variable Interests Resulting from Related Party Relationships under FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities," and whether to direct the staff to post that FSP to the website as final. (Estimated 60-minute discussion.)

  5. Life insurance settlements (viaticals). The Board will consider a proposed FSP related to accounting for life insurance settlements. The Board will consider the scope and whether to include business owned life insurance. (Estimated 30-minute discussion.)

  6. 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, February 16, 2005, 8:00 a.m.
Thursday, February 17, 2005, 9:00 a.m.

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the February 23 and March 2, 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 Interpretation.

February 2, 2005 Board Meeting

Fair value option. The Board decided not to expand the scope of the project to permit entities to elect (outside of the hedge accounting outlined in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities) to recognize in earnings the change in an asset’s or liability’s fair value attributable to only certain selected risks (rather than the total change in fair value).

Financial instruments: derivatives implementation. The Board discussed exposing the tentative guidance in Statement 133 Implementation Issue B38 for public comment. That guidance relates to an interpretation of the "net settlement" criterion in paragraph 9(a) of Statement 133 for embedded prepayment options in certain debt instruments. The Board observed that the issuance of Issue B38, as proposed, could cause many commercial loans with prepayment penalties to be bifurcated and accounted for separately as derivatives. In light of this potential outcome, the Board did not wish to discuss the tentative guidance in Issue B38 until the staff further researched whether Statement 133 could be amended or interpreted such that certain common prepayable loans with prepayment penalties would not be considered embedded derivatives subject to Issue B38. The Board did not reach a decision on whether to expose Issue B38 or consider revising the guidance in Statement 133. The Board directed the staff to present alternatives at a future Board meeting.

Agenda decision: property, plant, and equipment. The Board considered a number of possible agenda projects related to property, plant, and equipment. The Board decided not to add projects to its agenda to address (1) the accounting for rental costs that are incurred during construction of a real estate project, (2) liquidated damages received during the acquiring of property, plant, and equipment, and (3) the threshold for beginning to capitalize property, plant, and equipment. The Board directed the staff to further research the accounting for planned major maintenance activities of property, plant, and equipment with the objective of refining the scope of the potential project. Based on that research, the Board will consider whether to add a project on planned major maintenance activities to its agenda at a future meeting.


The following is a list of open meetings tentatively scheduled through March. All meetings are held in Norwalk, Connecticut, unless otherwise noted. 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, February 23, 2005—FASB Board Meeting
Wednesday, February 23, 2005—FASB Education Session
Wednesday, March 2, 2005—FASB Board Meeting
Wednesday, March 2, 2005—FASB Education Session
Tuesday, March 8, 2005—User Advisory Council Meeting, New York City
Wednesday, March 9, 2005—FASB Board Meeting
Wednesday, March 9, 2005—FASB Education Session
Wednesday, March 16, 2005—FASB Board Meeting
Wednesday, March 16, 2005—FASB Education Session
Wednesday, March 16, 2005—p.m., Emerging Issues Task Force Meeting (p.m. meeting canceled)
Thursday, March 17, 2005—Emerging Issues Task Force Meeting
Tuesday, March 22, 2005—Financial Accounting Standards Advisory Council
Wednesday, March 23, 2005—FASB Board Meeting
Wednesday, March 23, 2005—FASB Education Session
Wednesday, March 30, 2005—FASB Board Meeting
Wednesday, March 30, 2005—FASB Education Session