Action Alert No. 07-30
July 26, 2007
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)
Wednesday, August 1, 2007, 9:00 a.m.
- Effects of prior-year misstatements when quantifying misstatements in current-year financial statements (estimated 30-minute discussion). The Board will discuss comments received on proposed FSP FAS 154-a, "Considering the Effects of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements," and whether to proceed to issuing a final FSP.
- 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 SESSION
Wednesday, August 1, 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 BoardÃ¢â‚¬â„¢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.
July 18, 2007 Board Meeting
Codification issues. The Board discussed the following:
The Board reached decisions on several escalation issues identified during the course of the codification project. Escalation issues are a means of communicating to the Board about content that the staff proposes to include or exclude from the codification of U.S. GAAP. The Board made the following decisions:
- Appropriation of retained earnings for general purpose contingencies. The Board agreed to eliminate the reference to general purpose contingency reserves found in paragraph 28(b) of APB Opinion No. 9, Reporting the Results of Operations, and agreed that the guidance on the presentation of appropriation of retained earnings should be included in the Equity Topic of the codification, rather than in the Contingencies Topic.
- Original general revenue recognition guidance from 1934. The Board agreed to eliminate all but the second sentence of Chapter 1A, "Prior OpinionsRules Adopted by Membership," paragraph 1 of ARB No. 43, Restatement and Revision of Accounting Research Bulletins.
- Claims of subcontractors for terminated government contracts. The Board agreed to eliminate the special treatment afforded to claims of subcontractors included in Chapter 11C, "Government ContractsCost-Plus-Fixed-Fee Contracts," paragraphs 2430 of ARB 43 and require the application of FASB Statement No. 5, Accounting for Contingencies.
- Accounting for losses and combining contracts related to long-term construction-type contracts. The Board proposed to include the guidance found in ARB No. 45, Long-Term Construction-Type Contracts, as a general principle, preceding the guidance in AICPA Statement of Position (SOP) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, that would be considered the detailed application of the general principle that must be followed for certain types of long-term contracts.
- Definition of proven and probable reserves for extractive industries. The Board agreed to revise the definitions found in FASB Statement No. 89, Financial Reporting and Changing Prices, to be consistent with the definitions from Securities Act Industry Guide 7, referred to in EITF Issue No. 04-3, "Mining Assets: Impairment and Business Combinations."
- Transfers of real estate in exchange for nonmonetary assets other than real estate. The Board agreed that exchanges of real estate in exchange for nonmonetary assets other than real estate should be accounted for under APB Opinion No. 29, Accounting for Nonmonetary Transactions, rather than under FASB Statement No. 66, Accounting for Sales of Real Estate, and would result in an immediate recognition of gain or loss in the amount of the difference in fair values because transactions of this nature would most likely always meet the commercial substance criteria under Opinion 29.
- Use of the term retrospective for changes in estimates for real estate time-sharing transactions. The Board agreed to eliminate the use of the term retrospective in the context of an accounting for a change in estimate in SOP 04-2, Accounting for Real Estate Time-Sharing Transactions, to be consistent with the accounting for a change in estimate under FASB Statement No. 154, Accounting Changes and Error Corrections.
Proposed Changes to GAAP for Not-for-Profit Entities
The Board also reached the following decisions on three issues involving accounting and reporting by not-for-profit entities, and decided to add a project to its agenda to address those issues:
- Temporary control exception to consolidation of not-for-profit organizations. The Board agreed to amend SOP 94-3, Reporting of Related Entities by Not-for-Profit Organizations, and the AICPA Audit and Accounting Guide, Health Care Organizations (the Health Care Guide), to eliminate the temporary control exception to consolidation that still exists for financially interrelated not-for-profit organizations, and to make two related changes.
- Leasing transactions by not-for-profit organizations involving special-purpose entity lessors. The Board clarified that not-for-profit entities should continue to apply the guidance in EITF Issues No. 90-15, "Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions," No. 96-21, "Implementation Issues in Accounting for Leasing Transactions involving Special-Purpose Entities," and No. 97-1, "Implementation Issues in Accounting for Lease Transactions, including Those involving Special-Purpose Entities," when accounting for leasing transactions involving special-purpose entities. The Board agreed to amend SOP 94-3 and the Health Care Guide specifically to make that clarification.
- Other investments held by not-for-profit organizations. The Board agreed to amend the equity method guidance in SOP 94-3 and the Health Care Guide to require not-for-profit entities to apply the guidance in SOP 78-9, Accounting for Investments in Real Estate Ventures, EITF Issue No. 03-16, "Accounting for Investments in Limited Liability Companies," and FSP SOP 78-9-1, "Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-5," for investments in for-profit partnerships and limited liability companies in which they have a significant financial interest and which they would otherwise carry at cost (or amortized cost or lower of cost or market), rather than at fair value.
The Board authorized the staff to proceed to a draft of a proposed FSP for vote by written ballot with a comment period of at least 60 days. The final document is expected to be effective for fiscal years beginning after June 15, 2008.
Open discussion: Statement 140 implementationrepurchase financing agreements. The Board discussed a proposed change to the comment period deadline of the proposed FSP on accounting for transfers of financial assets and repurchase financing transactions. The Board decided that the comment period should be extended by two weeks from the previous planned date of August 31, 2007, to September 14, 2007.
FASB DOCUMENTS AVAILABLE
The following documents are available on the FASB website:
Proposed FASB Statement 133 Implementation Issue No. E23, "Issues Involving the Application of the Shortcut Method under Paragraph 68" (July 23, 2007). Comments are requested by September 21, 2007.
Proposed FSP FAS 140-d, "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions" (July 24, 2007). Comments are requested by September 14, 2007.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through September. 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, August 8, 2007FASB Board Meeting
Wednesday, August 8, 2007FASB Education Session
Wednesday, August 15, 2007FASB Board Meeting
Wednesday, August 15, 2007FASB Education Session
Wednesday, August 22, 2007FASB Board Meeting
Wednesday, August 22, 2007FASB Education Session
Wednesday, August 29, 2007FASB Board Meeting
Wednesday, August 29, 2007FASB Education Session
Tuesday, September 4, 2007Financial Guarantee Insurance Roundtable
Wednesday, September 5, 2007FASB Board Meeting
Wednesday, September 5, 2007FASB Education Session
Wednesday, September 12, 2007FASB Board Meeting
Wednesday, September 12, 2007FASB Education Session
Wednesday, September 19, 2007FASB Board Meeting
Wednesday, September 19, 2007FASB Education Session
Thursday, September 20, 2007Financial Accounting Standards Advisory Council Meeting
Wednesday, September 26, 2007FASB Board Meeting
Wednesday, September 26, 2007FASB Education Session
Thursday, September 27, 2007Liaison Meeting with the Institute of Management Accountants