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Action Alert No. 06-34
August 24, 2006
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, August 30, 2006, 9:00 a.m.
- Planned
major maintenance activities (estimated 30-minute
discussion). The Board will discuss comments received on proposed
FSP AUG AIR-a, "Planned Major Maintenance Activities," and redeliberate
certain issues in that proposed FSP.
- Measurement
of nonfinancial assets and nonfinancial liabilities in business
combinations and impairment evaluations (estimated 90-minute
discussion). The Board will discuss (a) practice issues regarding
the measurement of nonfinancial assets that are required to be measured
at fair value and (b) the alternatives to address those issues.
- 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 30, 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 September 6,
2006 Board meeting. Those topics will be posted to the FASB calendar four
days prior to the education session.
OPEN MEETING WITH REPRESENTATIVES OF THE AMERICAN GAS ASSOCIATION
AND THE EDISON ELECTRIC INSTITUTE
Monday, August 28, 2006, 2:30 p.m. - 5:00 p.m.
The Board will meet with representatives of the American Gas
Association and the Edison Electric Institute to discuss matters of mutual
interest.
BOARD ACTIONS
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.
August 16, 2006 Board Meeting
Financial
instruments: liabilities and equity. At the June 2006 education
sessions, the Board discussed two alternatives for describing the narrow
view of the equity approach. The Board directed the staff to further
develop one of those alternatives—the ownership approach—for future
comparison to the ownership-settlement approach and the reassessed
expected outcomes approach. The ownership approach modifies the
ownership-settlement approach by classifying all indirect ownership
instruments as liabilities or assets. Other aspects of the
ownership-settlement approach are retained.
At this Board meeting, the Board discussed further details of the
ownership approach including the financial statement location and display
for gains and losses arising from remeasurement of equity derivative
instruments. The Board decided:
- Under the ownership approach, all fair value changes in equity
derivative instruments (and any other instruments that are measured at
fair value) should be recognized in net income. Equity derivative
instruments include those that are freestanding or that are embedded
(for example, convertible debt is considered an equity derivative
instrument for this purpose).
- Although the Board believes display is important under the ownership
approach, presentation issues arising from measuring instruments at fair
value will not be addressed at this stage of the project. Rather, the
Board will address those issues in the Exposure Draft process by
considering (a) input from other projects addressing financial statement
display and (b) constituent input from the proposed forthcoming
Preliminary Views on liabilities and equity.
Fair value
option. The Board redeliberated the scope of Phase 1 of the
project. The Board decided that:
- Equity method investments will remain in the scope of Phase 1; no
eligibility criteria will be imposed for those investments; an entity
will be required to apply the fair value option, if elected, to all of
its financial investments (equity and debt) in an investee, rather than
on a contract-by-contract basis; and an entity may irrevocably elect the
fair value option upon obtaining the ability to exercise significant
influence.
- Investments in equity securities that do not have a readily
determinable fair value will remain in the scope of Phase 1 and no
eligibility criteria will be imposed for those investments.
- Insurance and reinsurance contracts that meet the definition of a
financial instrument will remain in the scope of Phase 1, and the scope
of Phase 1 will be expanded beyond insurance and reinsurance contracts
that are financial instruments to also include insurance contracts that
do not prohibit settlement of the insurer’s obligation by payment to a
third-party provider of goods or services rather than by payment to the
insured or other claimant.
- Warranty rights and obligations that meet the definition of a
financial instrument will remain in the scope of Phase 1, and the scope
of Phase 1 will be expanded beyond warranty rights and obligations that
are financial instruments to also include warranty rights and
obligations that do not prohibit settlement of the warranty obligation
by payment to a third-party provider of goods or services rather than by
payment to the claimant.
- Unconditional purchase obligations that are recorded as financial
liabilities on the purchaser’s statement of financial position as
discussed in paragraph 10 of FASB Statement No. 47, Disclosure of
Long-Term Obligations, will remain in the scope of Phase 1.
- Otherwise unrecognized firm commitments that satisfy the definition
of a firm commitment in FASB Statement No.133, Accounting for
Derivative Instruments and Hedging Activities, and involve only
financial instruments will remain in the scope of Phase 1.
- Written loan commitments not accounted for under Statement 133 will
no longer be excluded from the scope of Phase 1.
- Demand deposit accounts will be considered in Phase 2 of the project
and will be defined as financial liabilities of financial institutions
with demand features in a manner consistent with the IASB.
- The following items, which are excluded from the scope of FASB
Statement No. 107, Disclosures about Fair Value of Financial
Instruments, will also be excluded from the scope of Phase 1:
- Interests that would otherwise be consolidated
- Financial assets and financial liabilities recognized under lease
contracts as defined in FASB Statement No. 13, Accounting for
Leases
- Employers’ and plans’ financial obligations for pension benefits,
other postretirement benefits (including health care and life
insurance benefits), postemployment benefits, employee stock option
and stock purchase plans, and other forms of deferred compensation
arrangements as defined in FASB Statements No. 35, Accounting and
Reporting by Defined Benefit Pension Plans, No. 87, Employers’
Accounting for Pensions, No. 106, Employers’ Accounting for
Postretirement Benefits Other Than Pensions, No. 112,
Employers’ Accounting for Postemployment Benefits, No. 123
(revised December 2004), Share-Based Payment, No. 43,
Accounting for Compensated Absences, and No. 146, Accounting
for Costs Associated with Exit or Disposal Activities, and APB
Opinion No. 12, Omnibus Opinion—1967.
- No additional reference to the exclusion of income tax assets and
liabilities will be made in the standards section of the final
Statement.
Statement
133 implementation: hedging foreign exchange risk for a forecasted
foreign-currency-denominated debt issuance. The Board discussed
the issuance of proposed Statement 133 Implementation Issue, "Hedging
Functional-Currency-Equivalent Proceeds to Be Received from a Forecasted
Foreign-Currency-Denominated Debt Issuance." The Board deferred a decision
on the issuance of that proposed Implementation Issue and requested that
the staff perform further analysis including additional examples. That
analysis will be presented to the Board at a future meeting.
Fair
value measurements. The Board discussed the timing of a final
Statement on fair value measurements. The Board authorized the staff to
proceed to a revised draft of the Statement for vote by written ballot.
The Board plans to issue the Statement in September 2006.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
October. 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, September 6, 2006—FASB Board Meeting
Wednesday, September
6, 2006—FASB Education Session
Thursday, September 7, 2006—Emerging
Issues Task Force Meeting
Tuesday, September 12, 2006—Liaison Meeting
with the AICPA Accounting Standards Executive Committee
Wednesday,
September 13, 2006—FASB Board Meeting
Wednesday, September 13,
2006—FASB Education Session
Tuesday, September 19, 2006—Liaison Meeting
with Institute of Management Accountants
Wednesday, September 20,
2006—FASB Board Meeting
Wednesday, September 20, 2006—FASB Education
Session
Thursday, September 21, 2006—Financial Accounting Standards
Advisory Council Meeting
Wednesday, September 27, 2006—FASB Board
Meeting
Wednesday, September 27, 2006—FASB Education Session
Friday,
September 29, 2006—Liaison Meeting with the AICPA PCPS Technical Issues
Committee
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
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