Action Alert No. 06-38
September 21, 2006


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

Wednesday, September 27, 2006, 9:00 a.m.

  1. Conceptual framework (estimated 2.25-hour discussion). The Board will continue its discussion of matters relating to the concept of a reporting entity and begin its discussion of options over assets. The Canadian AcSB staff also will present its analysis of the comments received on the IASB Discussion Paper, Measurement Bases for Financial Reporting—Measurement on Initial Recognition. No decisions are expected on that portion of the meeting.

  2. Amendment of FSP FAS 123(R)-1 (estimated 15-minute discussion). The Board will consider comments received on proposed FSP FAS 123(R)-e, "Amendment of FASB Staff Position FAS 123(R)-1," and whether to approve for issuance a final FSP that will clarify the classification guidance in FSP FAS 123(R)-1, "Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R)." Specifically, the FSP is intended to amend FSP FAS 123(R)-1 to exclude certain transactions from the definition of modification as used in that FSP.

  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, September 27, 2006, following the Board meeting

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the October 4, 2006 Board meeting and other future Board meetings. Those topics will be posted to the FASB calendar four days prior to the education session.


Friday, September 29, 2006, 10:00 a.m.

The Board will meet with representatives of the AICPA Private Companies Practice Section Technical Issues Committee to discuss matters of mutual interest.


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.

September 13, 2006 Board Meeting

Financial guarantee insurance. The Board considered approaches to accounting by insurers for (1) premium revenue from financial guarantee insurance contracts, (2) installment premiums for those financial guarantee insurance contracts that have installment premiums, and (3) related contract acquisition costs. For premium revenue recognition, the Board decided on an approach that is based on release from risk (exposure) as measured by debt service (principal and interest) to be paid over the contractual duration of each contract. This approach would recognize premium revenues based on the ratio of debt service (principal and interest) paid each period to total contractual debt service (total principal and interest to be paid)—that is, insurance premium received or accrued is deferred as unearned revenue (premium) and recognized as revenue as the debt service payments are made by the issuer to investors. If an insured security has no interest or principal payments until maturity, the full contract premium will be recognized as revenue at the contract maturity date. The Board requested that the exposure document include a question related to when consideration of expected contractual life (as opposed to the full contractual life) would be appropriate and that respondents provide examples of such arrangements.

The Board affirmed its decision concerning claim loss recognition made at the August 9, 2006 Board meeting. That is, for purposes of claim recognition, the stand-ready loss liability for expected losses would be valued using transaction-specific inputs concerning the credit rating of the underlying insured security and the time value of money. The stand-ready liability would be in addition to the unearned premium and claims liabilities.

The Board also decided that the expected value of installment premiums on financial guarantee insurance contracts should be recognized as a receivable at the inception of the contract. The same amount would be recognized as an unearned revenue liability. The discount on the receivable would be accreted over the life of the contract through investment income.

Finally, the Board decided that contract acquisition costs should be defined, deferred, and amortized in accordance with the relevant guidance in FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises.

The Board directed the staff to draft an exposure document for Board consideration.

AcSEC clearance/Application of Interpretation 46(R) to investment companies. The Board met with representatives of the AICPA's Accounting Standards Executive Committee (AcSEC) and discussed final clearance of the AICPA Statement of Position (SOP), Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. The Board did not object to issuance of that final SOP.

The Board also discussed the issuance of a proposed FSP on the application of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to investment companies, to amend paragraphs 4(e) and 36 of that Interpretation. The Board deferred making a decision on the issuance of a proposed FSP and requested that the staff perform further analysis on the issue. That analysis will be presented at a future Board meeting.

Measurement of nonfinancial assets and nonfinancial liabilities in business combinations and impairment evaluations. The Board decided to proceed with the exposure of a proposed FSP on the fair value measurements in business combinations and impairment tests. The proposed FSP would clarify the existing guidance regarding fair value measurements in FASB Statements No. 141, Business Combinations, No. 142, Goodwill and Other Intangible Assets, and No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The proposed FSP would be effective until the reporting entity adopts the fair value measurements Statement. The proposed FSP will be posted to the FASB website for a 30-day comment period.


FASB Statement No. 157, Fair Value Measurements, was issued on September 15, 2006, and is available on the FASB website.


The following is a list of open meetings tentatively scheduled through November. 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.

Tuesday, October 3, 2006—User Advisory Council Meeting, New York City
Wednesday, October 4, 2006—FASB Board Meeting
Wednesday, October 4, 2006—FASB Education Session
Wednesday, October 11, 2006—FASB Board Meeting
Wednesday, October 11, 2006—FASB Education Session
Tuesday, October 17, 2006—Liaison Meeting with CFA Institute
Wednesday, October 18, 2006—FASB Board Meeting
Wednesday, October 18, 2006—FASB Education Session
Monday, October 23, 2006—FASB/IASB Joint Board Meeting, Norwalk, CT
Tuesday, October 24, 2006—FASB/IASB Joint Board Meeting, Norwalk, CT
Wednesday, November 1, 2006—FASB Board Meeting
Wednesday, November 1, 2006—FASB Education Session
Tuesday, November 7, 2006—Liaison Meeting with National Investors Relations Institute
Wednesday, November 8, 2006—FASB Board Meeting
Wednesday, November 8, 2006—FASB Education Session
Wednesday, November 15, 2006—FASB Board Meeting
Wednesday, November 15, 2006—FASB Education Session
Wednesday, November 15, 2006—p.m., Emerging Issues Task Force Meeting
Thursday, November 16, 2006—Emerging Issues Task Force Meeting
Tuesday, November 21, 2006—FASB Board Meeting
Tuesday, November 21, 2006—FASB Education Session
Wednesday, November 29, 2006—FASB Board Meeting
Wednesday, November 29, 2006—FASB Education Session