-->Printer-friendly Action Alert No. 06-39

Action Alert No. 06-39
September 28, 2006


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

Wednesday, October 4, 2006, 8:30 a.m.

The Board meeting will begin at 8:30 a.m. instead of 9:00 a.m.

  1. Conceptual framework (estimated 45-minute discussion). The Canadian AcSB staff 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.

  2. Statement 133 implementation issue—cash flows hedges of variable-rate assets and liabilities (estimated 30-minute discussion).  The Board will discuss cash flow hedges, specifically, hedging interest cash flows on variable-rate assets and liabilities that are not based on a benchmark interest rate.

  3. Revision of the definition of a public entity in a conduit borrowing arrangement (estimated 30-minute discussion).  The Board will consider comments received from respondents on proposed FSP FAS 126-a, "Revision to the Definition of a Public Entity to Include an Obligor for Conduit Debt Securities," and whether to approve the final FSP for issuance.

  4. Amendment of FAS 123(R)—technical corrections (estimated 15-minute discussion).  The Board will consider comments received from respondents on proposed FSP FAS 123(R)-f, "Technical Corrections of FASB Statement No. 123(R)," and whether to approve for issuance a final FSP that will amend (a) paragraph A240(d)(1) to exempt nonpublic entities from disclosing the aggregate intrinsic value of outstanding fully vested share options (or share units) and share options expected to vest, (b) paragraph A102 of Illustration 4(b) to revise the computation of the minimum compensation cost that must be recognized to comply with paragraph 42 of Statement 123(R), and (c) paragraph A170 of Illustration 13(e) to indicate that at the date that the illustrative awards were no longer probable of vesting, any previously recognized compensation cost should have been reversed.

  5. Pensions disclosure (estimated 45-minute discussion).  The Board will consider adding a project to its agenda requiring companies to disclose additional information about the funding requirements of their pension plans because of the Pension Protection Act of 2006.

  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, October 4, 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 11, 2006 Board meeting and other future Board meetings. Those topics will be posted to the FASB calendar four days prior to the education session.


Tuesday, October 3, 2006, 9:00 a.m.

The Helmsley Hotel
212 East 42nd Street
New York, New York

The Board and the User Advisory Council will meet to discuss the following:

  1. Fair value of financial instruments

  2. The Board’s project on financial statement presentation

  3. The priorities of the FASB.

The User Advisory Council will hear reports from the chairman of the FASB and from a representative of the Office of the Chief Accountant of the SEC.  The agenda is subject to change.

Closed to Public Observation

The User Advisory Council will hold a closed session with the Board to discuss administrative matters.  The public portion of the meeting is expected to end at approximately 1:00 p.m.


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 20, 2006 Board Meeting

Business combinations: applying the acquisition method. The Board continued redeliberations of its June 2005 Exposure Draft, Business Combinations.  The Board discussed the recognition and measurement of intangible assets acquired in a business combination.  The Board:

  1. Affirmed that an intangible asset that is identifiable (that is, contractual or separable) can be measured with sufficient reliability and should be recognized separately from goodwill.

  2. Agreed that an identifiable intangible asset acquired in a business combination should be measured at a current exchange value rather than at an entity-specific value.

  3. Decided that the final Statement should provide accounting guidance for the subsequent accounting by the acquirer for (a) intangible assets that the acquirer does not intend to use in the traditional sense and (b) intangible assets that will be used for a period significantly less than their economic useful life.

Financial statement presentation. The Board discussed and further developed an overall working format for presenting financial information within the basic financial statements—namely the statements of financial position, comprehensive income, and cash flows.  The Board agreed that:

  1. Treasury assets would be reported in a subcategory within the financing section (that is, the financing section would include two subcategories—treasury assets and financing liabilities). Treasury assets would not be reported within the business section (as the Board previously concluded).  The Board expects to discuss a proposed definition of treasury assets in October along with a proposed definition of financing liabilities.

  2. All income taxes, including taxes related to transactions with owners, would be presented in a separate section in the basic financial statements.  Amounts presented in all other sections (the business section, financing section, and discontinued operations) would be pretax amounts, eliminating the need for intraperiod tax allocation requirements.  Also, income taxes related to transactions with owners would be recognized in comprehensive income rather than as a direct charge or credit to equity.  The Board also agreed to consider whether changes to existing income tax disclosure requirements are made necessary by the proposed changes in the presentation.

  3. Discontinued operations would be presented as a separate section in the financial statements.  The Board also agreed that the definition of discontinued operations should be revisited with the IASB so that U.S. GAAP and IFRS have the same definition.

  4. General guidance, not a "bright-line" rule, would be included in the financial statement presentation standard regarding when items should be presented as a separate line item and not aggregated on the financial statements.  The Board also agreed that information would be required to be presented in the financial statements on a gross basis except when the additional information in a gross presentation provides no incremental value.

  5. Extraordinary items would not be presented as a separate section or category in the financial statements and the concept of extraordinary items would be eliminated.

The Board considered but did not reach a conclusion on:

  1. Whether to present a category other than operating in the business section of the financial statements.  The Board directed the staff to consider whether the business section might include an "investment" category for reporting certain financial assets.

  2. Whether to provide disaggregated information about discontinued operations on the face of the basic financial statements.  The Board directed the staff to explore presentation alternatives further, in particular, in presenting discontinued operations as one amount on the face of each financial statement supplemented by disaggregated information in the notes to the financial statements.

  3. Whether to present information in the statement of comprehensive income by function or nature.  The Board expressed interest in presenting information by function with certain information presented by nature either on the face of or in the notes to the financial statements.

The Board will revisit those three issues at a future meeting.

Based on its discussion, the sections and categories in the financial statements might be as follows (the Board has not addressed totals, subtotals, or the order in which sections would be presented):

Statement of Financial Position
Statement of Comprehensive Income
Statement of Cash Flows
  • Operating assets and liabilities

  • Investments
  • Operating income

  • Investing income
  • Operating cash flows

  • Investing cash flows
Discontinued operations Discontinued operations Discontinued operations
  • Financing liabilities

  • Treasury assets

  • Equity
  • Financing expenses

  • Treasury income
  • Financing cash flows

  • Treasury cash flows

  • Equity cash flows
Income taxes Income taxes Income taxes

Financial instruments: due process documents. The Board discussed the initial scope of the financial instruments due process document.  The Board decided that:

  1. The initial scope of the due process document will be based on the following proposed definition of a financial instrument:

      A financial instrument is:

      1. Cash

      2. Evidence representing a residual or other ownership interest in an entity

      3. A contractual obligation of one party to deliver a financial instrument to a second party and a corresponding contractual right of the second party to require receipt of that financial instrument in exchange for no consideration other than release from the obligation

      4. A contractual obligation of one party to exchange financial instruments with a second party and a contractual right of the second party to require an exchange of financial instruments with the first party.

      A financial asset is a financial instrument that is an asset.

      A financial liability is a financial instrument that is a liability.

      A financial instrument classified by an entity in the equity section of its balance sheet (or statement of financial position) is neither a financial asset nor a financial liability to that entity.

  2. Legal and statutory but noncontractual obligations and rights to deliver or exchange financial instruments (for example, taxes) will not be included in the scope of the due process document.

  3. The following items will be excluded from the scope of the due process document, whether or not the items are financial instruments:

    1. Investments in consolidated subsidiaries, consolidated variable interest entities (FASB only), and associates (equity method investees in FASB terms) or joint ventures

    2. Contingent consideration in business combinations

    3. Leases

    4. Royalty contracts and other contracts for rights to use assets (revenue recognition issues)

    5. Pensions and other postemployment benefits

    6. Financial instruments classified as equity by the reporting entity

    7. Insurance and related contracts

    8. Contracts related to share-based payments.

  4. Derivative instruments that are not financial instruments but that are required by current GAAP to be regularly remeasured at fair value will be included in the scope of the due process document.  (One example is a derivative instrument that requires delivery of a commodity.)

FASB ratification of EITF consensuses and tentative conclusions. The Board considered and ratified the consensuses on the following issues reached at the September 7, 2006 EITF meeting.

  1. Issue No 06-1, "Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service from the Service Provider"

  2. Issue No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements"

  3. Issue No. 06-5, "Accounting for Purchases of Life Insurance—Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4."

The Board also considered and ratified the tentative conclusions on the following issues reached at the September 7, 2006 EITF meeting. The Board also approved the exposure of a draft abstract for each of these issues for a comment period that will end on October 13, 2006. The draft abstracts are expected to be posted to the FASB website after September 25, 2006.

  1. Issue No. 06-6, "Debtor's Accounting for a Modification (or Exchange) of Convertible Debt Instruments"

  2. Issue No. 06-7, "Issuer's Accounting for a Previously Bifurcated Conversion Option in a Convertible Debt Instrument When the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement No. 133"

  3. Issue No. 06-8, "Applicability of the Assessment of a Buyer's Continuing Investment under FASB Statement No. 66 for Sales of Condominiums"

  4. Issue No. 06-9, "Reporting a Change in (or the Elimination of) a Previously Existing Difference between the Fiscal Year-End of a Parent Company and That of a Consolidated Entity or between the Reporting Period of an Investor and That of an Equity Method Investee."


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.

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

FASB Meetings Available by Audio Webcast and Telephone

To monitor available live meetings free of charge by audio webcast, access the link http://www.trz.cc/fasb/live.html. To monitor by telephone, call 1-800-846-4717. You will be charged $.45 per minute, and VISA, MasterCard, American Express, or Discover Card is required. To listen to a recording of the most recent Board meeting via webcast free of charge, access the link http://www.trz.cc/fasb/archive.html. To listen to a recording by telephone, for a charge of $.45 per minute, call 1-800-462-0393. Questions can be directed to 1-800-846-4630.

Handouts distributed to the audience at Board meetings are posted to our website one-half hour before the start of the meeting. A synopsis of each issue to be discussed at EITF meetings also is posted to this website.

Education sessions are not available by audio webcast or telephone, and no handouts are distributed to the audience.