Action Alert No. 06-20
May 18, 2006


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

No Board meetings are planned for the week of May 22, 2006. The next scheduled Board meeting is Wednesday, May 31, 2006, and topics for that Board meeting will be announced in next week's issue of Action Alert.


Wednesday, May 24, 2006, 9:00 a.m.

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the May 31, 2006 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


Thursday, May 25, 2006, 1:00 p.m.

The Board will meet with representatives of the American Accounting Association’s Financial Accounting Standards 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.

May 10, 2006 Board Meeting

Uncertain tax positions. The Board decided:

  1. To use the administrative practices and precedents concept in the final Interpretation. Administrative practices and precedents apply where there is broad understanding among taxpayers, tax practitioners, and taxing authorities that the authority will not take issue with a position, presuming the taxing authority has access to all the relevant facts.

  2. That the term tax position also includes a decision to exclude reporting income in a tax return, or the decision to classify a transaction, entity, or other position in a tax return as tax exempt.

  3. To remove the recognition and measurement guidance relating to uncertainties in income taxes that predate or result from a purchase business combination from Question 17 of the FASB Special Report, A Guide to Implementation of Statement 109 on Accounting for Income Taxes, and to nullify the guidance in EITF Issue No. 93-7, “Uncertainties Related to Income Taxes in a Purchase Business Combination,” relating to uncertainties in income taxes that predate or result from a purchase business combination.

  4. Not to address classification and presentation issues that are currently addressed in Issue 93-7 regarding uncertainties in income taxes that predate or result from a purchase business combination in the final Interpretation. Those issues will be addressed in the Board’s joint project with the IASB on business combinations.

  5. Not to provide any differential recognition and measurement, disclosure (other than that which currently exists in Statement 109), or transition guidance for nonpublic enterprises, including not-for-profit entities.

  6. To amend FASB Statement No. 5, Accounting for Contingencies, to exclude contingencies relating to income taxes, and require the following disclosures as part of the final Interpretation:

    1. A tabular reconciliation of the beginning and ending balances of unrecognized tax benefits in a manner similar to that prescribed in other recent guidance that addresses estimates with significant uncertainty

    2. For items in which it is reasonably possible that the estimate of the realized tax benefit (an increase in the unrecognized tax benefit liability) for the tax uncertainty will significantly change in the next 12 months:

        (1)  The nature of the uncertainty

        (2)  The nature of the event that could occur in the next 12 months that would cause the change

        (3)  An estimate of the range of the reasonably possible change or a statement that an estimate of the change cannot be made.

    3. A description of open tax years by major tax jurisdictions.

  7. To require the following transition disclosures:

    1. The nature of the change in accounting principle

    2. The cumulative effect of the change on retained earnings in the statement of financial position as of the date of adoption.

The Board directed the staff to proceed to a draft of a final Interpretation for vote by written ballot.


At its May 5, 2006 meeting, the EITF Agenda Committee discussed the following four potential new issues and made the following decisions:

  1. Accounting for a Previously Bifurcated Conversion Option in Convertible Debt That No Longer Meets the Bifurcation Criteria in Paragraph 12 of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities—This issue was added to the EITF agenda.

  2. Application of EITF Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues," to the Reduction or Elimination of an Embedded Conversion Option—This issue was added to the EITF agenda as a reconsideration of the consensus reached in Issue 05-7.

  3. Application of AICPA Audit and Accounting Guide, Brokers and Dealers in Securities, to Entities That Engage in Energy Trading Activities—A decision on this potential issue was deferred pending the FASB staff's additional research to identify possible scope alternatives as well as the types of inventory that may be accounted for at fair value.

  4. Accounting for Joint Development, Manufacturing, and Marketing Arrangements in the Biotechnology and Pharmaceutical Industries—A decision on this potential issue was deferred pending the FASB staff's additional research on the structures of these arrangements for determining the scope of this issue.


The following is a list of open meetings tentatively scheduled through June. 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, May 31, 2006—FASB Board Meeting
Wednesday, May 31, 2006—FASB Education Session
Wednesday, June 7, 2006—FASB Board Meeting
Wednesday, June 7, 2006—FASB Education Session
Wednesday, June 14, 2006—No FASB Board Meeting
Wednesday, June 14, 2006—FASB Education Session
Thursday, June 15, 2006—Emerging Issues Task Force Meeting
Monday, June 19, 2006—a.m., Fair Value Option Roundtable Meeting
Monday, June 19, 2006—p.m., Liaison Meeting with Financial Executives International, Stamford, CT
Tuesday, June 20, 2006—FASB Board Meeting
Tuesday, June 20, 2006—FASB Education Session
Wednesday, June 21, 2006—Small Business Advisory Council Meeting
Thursday, June 22, 2006—Financial Accounting Standards Advisory Council Meeting
Tuesday, June 27, 2006—Postretirement Benefit Obligations including Pensions Roundtable Meeting
Wednesday, June 28, 2006—FASB Board Meeting
Wednesday, June 28, 2006—FASB Education Session