Action Alert No. 06-49
December 7, 2006
NOTICE OF MEETINGS
OPEN BOARD MEETING
meetings are available by audio webcast and telephone.)
Wednesday, December 13, 2006, 8:00 a.m.
The Board meeting will begin at 8:00 a.m. instead of 9:00
statement presentation (estimated 2-hour discussion). The
Board will discuss:
- Issues related to the statement of cash flows (primarily whether
the direct or indirect method should be used)
- Alternative formats for presenting other comprehensive income
items in the statement of comprehensive income
- How the working format currently being developed might be applied
by financial institutions and what modifications, if any, are
necessary to address their financial statement presentation needs.
- Statement 133
Implementation Issue—cash flow hedges of variable-rate assets and
liabilities that are not based on a benchmark interest rate
(estimated 30-minute discussion). The Board will discuss comments
received on proposed Statement 133 Implementation Issue No. G26, "Cash
Flow Hedges: Hedging Interest Cash Flows on Variable-Rate Assets and
Liabilities That Are Not Based on a Benchmark Interest Rate," and will
decide whether to issue that tentative guidance as final.
value measurements in business combinations and impairment tests
(estimated 30-minute discussion). The Board will discuss whether
to issue a final FSP that would amend 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, to clarify the existing guidance on fair value
measurements that is presently contained in those Statements. Proposed
FSP FAS 141-b, 142-e, and 144-b,"Fair Value Measurements in Business
Combinations and Impairment Tests," would be effective until the
reporting entity adopts FASB Statement No. 157, Fair Value
- 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 SESSIONS
Wednesday, December 13, 2006, following the Board Meeting
Thursday, December 14, 2006, 9:00 a.m.
The Board will hold educational, non-decision-making sessions to
discuss topics that are anticipated to be discussed at the December 19,
2006, and December 20, 2006 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, Interpretation, or
November 29, 2006 Board Meeting
receivables or liabilities recognized upon payment or receipt of cash
collateral in master netting arrangements. The Board decided to
issue a proposed FSP on offsetting receivables or liabilities recognized
upon payment or receipt of cash collateral in master netting arrangements.
The proposed FSP will provide guidance on whether companies can offset a
receivable recognized for the right to receive a return of cash collateral
or a liability recognized for the obligation to return cash collateral
against net derivative positions in master netting arrangements without
considering the intent to offset criterion in paragraph 5(c) of FASB
Interpretation No. 39, Offsetting of Amounts Related to Certain
Contracts. The proposed FSP will be exposed for a 45-day comment
period and will be applicable to fiscal years beginning after December 15,
2006, with retrospective application required. Early adoption will not be
permitted. The Board directed the staff to proceed to a draft of the
proposed FSP for vote by written ballot.
benefit obligations, including pensions. The Board decided to
issue a proposed FSP on conforming amendments to the Illustrations in FASB
Statements 87, 88, and 106 and to related Staff Implementation Guides, for
exposure with a 30-day comment period. The proposed FSP will conform the
illustrations contained in the following appendixes to reflect the
provisions of FASB Statement No. 158, Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans:
The proposed FSP also will make conforming changes to the
question-and-answer implementation guidance contained in the following
FASB Special Reports and incorporate them as new appendixes of Statements
87, 88, and 106:
- Appendix B of FASB Statement No. 87, Employers' Accounting for
- Appendix B of FASB Statement No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
- Appendix C of FASB Statement No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions.
- A Guide to Implementation of Statement 87 on Employers' Accounting
- A Guide to Implementation of Statement 88 on Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits
- A Guide to Implementation of Statement 106 on Employers' Accounting
for Postretirement Benefits Other Than Pensions.
guarantee insurance. The Board discussed remaining issues
identified during the drafting of the proposed Interpretation of FASB
Statement No. 60, Accounting and Reporting by Insurance
Enterprises, for financial guarantee insurance contracts as well
disclosures, effective date, transition, and exposure period.
Specifically, the Board decided the following:
- Not to define expected loss within the proposed
- Include guidance within the proposed Interpretation regarding (a)
the accounting treatment for refundings and (b) refundings in which the
same financial guarantor that insured the retired financial obligation
insures the new financial obligation.
- Exclude mortgage guarantee insurance and credit insurance from the
scope of the proposed Interpretation.
- Not include accounting guidance within the proposed Interpretation
relating to purchases and subsequent sales of financial obligations
guaranteed by the holder of the financial obligation.
- Include the following disclosures within the proposed Interpretation
in addition to those required in Statement 60 and other related
insurance accounting guidance:
- With regard to revenue recognition:
(1) Accounting policy
(2) Dollar amount of revenue generated from the acceleration
of premium recognition due to early terminations for the period.
- For installment premium financial guarantee insurance contracts:
(1) The amount recognized in the balance sheet for the current
period as premium receivable and unearned revenue (if not separately
(2) The amount of accretion on the premium receivable recorded
as a component of investment income for the period (if not separately
(3) The assumptions used in calculating the balance sheet
amounts (receivable only) including the range of discount rates used
(4) A schedule of the expected installment premiums to be
earned as follows:
(a) The remaining quarters for the current annual period
(b) The four quarters of the subsequent annual period
(c) The next three annual periods
(d) The remaining periods aggregated in five-year
- For the claims and expected claims liabilities, a description of
the internal surveillance list used to accrue the expected claim
liability (and a description of each category within that list), the
criteria used to place an insured financial obligation in each
category, and management's process for monitoring and moving a
financial obligation between categories. In addition, the following
information should be disclosed in tabular form separated in a manner
consistent with how management tracks its portfolio:
(1) Par outstanding by category
(2) Debt service outstanding by category
(3) Number of policies by category
(4) Remaining average contractual policy term by category
(5) Current pre-guarantee average rating by category
(6) Gross claim liability (discounted) by category (gross of
(7) Expected subrogation (discounted) by category (gross of
(8) Net claim liability (discounted) by category (gross of
The total net claim liability (discounted) should be reconciled to
the amount reported in the balance sheet. The amount of transfers
between categories should be disclosed and described.
- For claim adjustment liability and remediation liabilities, the
amounts and nature of these liabilities recorded in the balance sheet
and the income statement including assumptions used in calculating
- Require application of the proposed Interpretation to the first
fiscal year beginning after December 15, 2007 (but include a question
within the proposed Interpretation about whether the effective date
allows sufficient time for implementation).
- Implement transition guidance that permits a cumulative-effect
adjustment (using current information) to retained earnings or to other
components of equity or net assets as of the beginning of the year of
adoption (but include a question within the proposed Interpretation
about whether constituents would have the necessary information for
retrospective application). Early adoption would not be permitted.
- Expose the proposed Interpretation for public comment for a period
of 90 days, ending no later than April 15, 2007.
The Board agreed to hold an open roundtable discussion subsequent to
the issuance of the Exposure Draft of the proposed Interpretation. The
Board also discussed the use of interest rates in discounting the future
installment premiums (both the asset and the liability), pre-claims
liabilities, and claims liabilities but did not make a decision on this
issue. The Board agreed to discuss interest rates used in discounting at a
of EITF consensuses and tentative conclusions. The Board
considered and ratified the consensuses reached at the November 16, 2006
EITF meeting on the following four Issues.
- Issue No. 06-6, "Debtor's Accounting for a Modification (or
Exchange) of Convertible Debt Instruments"
- 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, Accounting for Derivative Instruments and Hedging
- Issue No. 06-8, "Applicability of the Assessment of a Buyer's
Continuing Investment under FASB Statement No. 66, Accounting for
Sales of Real Estate, for Sales of Condominiums"
- 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 Board also considered and ratified the tentative conclusions
reached at the November 16, 2006 EITF meeting on the following two Issues.
Additionally, the Board approved the exposure of a draft abstract for each
of the Issues for a comment period that will end on January 22, 2007. The
draft abstracts are expected to be posted to the FASB website after
November 29, 2006.
- Issue No. 06-10, "Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Collateral Assignment Split-Dollar
Life Insurance Arrangements"
- Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on
Share-Based Payment Awards."
FASB DOCUMENT AVAILABLE
FSP FAS 158-a, "Conforming Amendments to the Illustrations in FASB
Statements No. 87, No. 88, and No. 106 and to Related Staff Implementation
Guides," was issued and posted to the FASB website on December 7, 2006.
Comments are requested by January 8, 2007.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
January. 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, December 19, 2006—FASB Board Meeting
20, 2006—FASB Board Meeting
Wednesday, December 20, 2006—FASB Education
Wednesday, December 27, 2006—No FASB Board Meeting or
Education Session scheduled
Wednesday, January 3, 2007—No FASB
Board Meeting scheduled
Wednesday, January 3, 2007—FASB Education
Tuesday, January 9, 2007—Liaison Meeting with the National
Association of College and University Business Officers
January 10, 2007—FASB Board Meeting
Wednesday, January 10, 2007—FASB
Wednesday, January 17, 2007—FASB Board
Wednesday, January 17, 2007—FASB Education
Wednesday, January 24, 2007—FASB Board Meeting
January 24, 2007—FASB Education Session
Wednesday, January 31,
2007—FASB Board Meeting
Wednesday, January 31, 2007—FASB Education