REVISED 3/13/06 for order of
Action Alert No. 06-10
March 9, 2006
NOTICE OF MEETINGS
OPEN BOARD MEETING
meetings are available by audio webcast and telephone.)
Wednesday, March 15, 2006, 9:00 a.m.
benefit obligations, including pensions (estimated 1-hour
discussion). The Board will discuss the initial phase of this
project. Specifically, the Board will discuss (a) the application of the
proposed Statement by a not-for-profit organization that sponsors a
defined benefit postretirement benefit plan and prepares financial
statements following the guidance in FASB Statement No. 117,
Financial Statements of Not-for-Profit Organizations, (b) the
effective date and transition for not-for-profit organizations and
nonpublic entities, (c) guidance related to discount rate assumptions,
and (d) whether the perceived benefits of the proposed Statement exceed
the perceived costs of its implementation.
value measurements (estimated 1-hour discussion). The
Board will clarify aspects of the guidance included in the October 21,
2005 working draft of the fair value measurements final Statement,
including the guidance for using transaction prices to measure fair
value at initial recognition. The Board also will discuss the effective
date and timing of the final Statement.
settlements (estimated 15-minute discussion). The Board
will discuss two issues raised in the external review process and will
discuss whether to proceed to a final FSP.
instruments: liabilities and equity (estimated 1-hour
discussion). The Board will discuss how to determine the substance
of an arrangement through (a) linking instruments that are part of the
same arrangement and (b) distinguishing between substantive and
nonsubstantive features of an arrangement.
- 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, March 15, 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 March 22, 2006
Board meeting. Those topics will be posted to the FASB calendar four
days prior to the education session.
OPEN MEETING OF THE EMERGING ISSUES TASK FORCE
(This meeting is
available by audio webcast and telephone.)
Thursday, March 16, 2006, 8:30 a.m. – 4:30 p.m.
The Task Force plans to discuss all of the following issues
in the order shown:
- Issue No. 05-1, "Accounting for the Conversion of an Instrument That
Becomes Convertible upon the Issuer's Exercise of a Call Option"
- Issue No. 06-1, "Accounting for Consideration Given by a Service
Provider to Manufacturers or Resellers of Specialized Equipment
Necessary for an End-Customer to Receive a Service from the Service
- Issue No. 06-3, "How Sales Taxes Collected from Customers and
Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation)"
- Issue No. 06-4, "Accounting for the Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life
- Issue No. 06-2, "Accounting for Sabbatical Leave and Other Similar
Benefits Pursuant to FASB Statement No. 43, Accounting for
The Task Force also plans to consider a proposed modification to the
consensus reached at the September 15, 2005 EITF meeting on Issue No.
05-7, "Accounting for Modifications to Conversion Options Embedded in Debt
Instruments and Related Issues."
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
March 1, 2006 Board Meeting
framework. The Board continued its deliberations on this joint
FASB/IASB project by discussing the working definitions of an asset and a
liability. The staff also reported that an Exposure Draft of a Concepts
Statement on objectives of financial reporting and the qualitative
characteristics of decision-useful financial reporting information is now
expected to be issued in the second quarter of 2006.
Definition of an Asset
- The Board discussed the following proposed working definition of an
asset that reflects revisions resulting from Board decisions reached in
An asset of an entity is:
- Cash held by the entity
- A present right of the entity to cash
- A present right, or other present privilege, of the entity to a
resource that is capable of generating economic benefits to the
entity, either directly or indirectly.
The Board agreed that:
- The notion of other present privilege of the entity is
better than other access (as proposed in December 2005)
- The phrases cash held by the entity and a present right
of the entity to cash are not necessary because those items meet
part (c) of the definition, as modified
- The words either directly or indirectly should not be
included in the definition but rather explained in amplifying text.
- The proposed working definition should be tested by applying it to
certain accounting issues that have been difficult to resolve.
- The Board provided other suggestions and clarifications for further
consideration, including particular wording for the definition and its
Definition of a Liability
- The Board discussed the following proposed working definition of a
A liability of an entity is its present obligation to one or
more other entities that compels potential outflows or other potential
sacrifices of economic benefits.
- The Board agreed that:
- Liability should continue to be defined directly, with
reference to assets.
- It is the present obligation, not the future sacrifice, that is
- An obligation to forgo a cash inflow or to stand aside can be a
liability, or perhaps a reduction in an asset.
- Only an obligation to one or more other entities can be a
- The notion in the current definition of little or no discretion to
avoid a future sacrifice should be replaced, perhaps by a notion of
legal or equivalent compulsion.
- The definition need not include "probable" or other notions of
likelihood, which instead belong in recognition criteria or
- Explicit reference to past events is unnecessary—redundant—because
a present obligation can only have arisen from past events.
recognition. The Board discussed two topics related to accounting
for revenue contracts under the assets and liabilities approach—(1)
accounting for wholly executory (or wholly unperformed) revenue contracts
and (2) assessing when performance has occurred and, thus, when revenue
should be recognized.
The Board tentatively agreed that unconditional rights and obligations
in wholly executory revenue contracts would meet the definitions of assets
and liabilities. Moreover, the Board agreed that a reporting entity would
not recognize any assets or liabilities at the inception of a wholly
executory contract for which the legal remedy in the event of breach is
monetary damages (and, thus, the unit of account is the contract as a
whole). That is because the net measurement of those assets and
liabilities at contract inception would be zero under the allocated
customer consideration approach. However, the Board agreed that a
reporting entity would recognize separate assets and liabilities at the
inception of a wholly executory contract for which legal remedy in the
event of breach would be specific performance. That is because the unit of
account is the individual assets and liabilities arising from the
The Board discussed two methods for assessing when performance occurs
under a contract (and, thus, when revenue should be recognized) but did
not reach any decisions. The Board directed the staff to further analyze
both methods in a variety of different fact patterns.
combinations. The Board continued redeliberations of its June 2005
Exposure Draft, Business Combinations. The Board affirmed that the
formation of a joint venture should be excluded from the scope of the
business combinations final Statement. The Board also decided to explore
developing a new definition of a business combination.
tax positions. The Board decided that the measurement attribute
for the amount of recognized tax benefit should be the maximum amount
which is more likely than not to be realized.
financial assets. The Board decided that servicing assets should
be accounted for as proceeds of a sale when a transferor enters into a
transaction that results in a separately recognized servicing asset for
At its March 7, 2006 meeting, the EITF
Agenda Committee discussed a potential new issue, "Transactions
Involving the Purchase of Financial Assets and Simultaneous Repurchase of
the Same Financial Assets with the Seller," and deferred making a decision
on this potential new issue pending a decision by the Board to add a
project to its agenda to provide guidance on the issue.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
April. 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, March 22, 2006—FASB Board Meeting
Wednesday, March 22,
2006—FASB Education Session
Thursday, March 23, 2006—Financial
Accounting Standards Advisory Council Meeting
Tuesday, March 28,
2006—FASB Board Meeting
Wednesday, March 29, 2006—FASB Education
Wednesday, April 5, 2006—FASB Board Meeting
April 5, 2006—FASB Education Session
Tuesday, April 11, 2006—User
Advisory Council Meeting, New York City
Wednesday, April 12, 2006—FASB
Wednesday, April 12, 2006—FASB Education
Wednesday, April 19, 2006—FASB Board Meeting
April 19, 2006—FASB Education Session
Thursday, April 27,
2006—FASB/IASB Joint Board Meeting, London
Friday, April 28,
2006—FASB/IASB Joint Board Meeting, London