Action Alert No. 06-23
June 8, 2006


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

No Board meetings are planned for the week of June 12, 2006. The next scheduled Board meeting is Tuesday, June 20, 2006, and topics for that Board meeting will be announced in next week’s issue of Action Alert.


Wednesday, June 14, 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 a future Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.

(This meeting is available by audio webcast and telephone.)

Thursday, June 15, 2006, 8:30 a.m. – 4:15 p.m.

The Task Force plans to discuss all of the following issues in the order shown:

  1. Issue No. 06-2, "Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43"

  2. 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"

  3. Issue No. 05-1, "Accounting for the Conversion of an Instrument That Became Convertible upon the Issuer's Exercise of a Call Option"

  4. Issue No. 05-7, "Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues"

  5. Issue No. 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)"

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

  7. 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."


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 31, 2006 Board Meeting

Useful life and amortization of intangible assets. The Board discussed the comment letters received on proposed FSP FAS 142-d, "Amortization and Impairment of Acquired Renewable Intangible Assets." The Board decided to discontinue consideration of the issue and removed the project from the Board’s agenda.

Business combinations: applying the acquisition method. The Board continued its redeliberations of the June 2005 FASB Exposure Draft, Business Combinations. The Board focused on an approach for making exceptions to the recognition and fair value measurement principles that it affirmed in past meetings. The Board made the following decisions:

Assets Held for Sale

  1. The Exposure Draft proposed an exception to the fair value measurement principle for assets held for sale (it proposed that those assets be measured at fair value less cost to sell). The Board decided instead that those assets should be measured at fair value and decided to amend FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to replace "fair value less cost to sell" with "fair value."

  2. The Board also decided to amend Statement 144 to eliminate the special guidance for determining whether an acquired asset meets the held-for-sale criteria (that guidance, contained in paragraph 32 of Statement 144, allowed the acquirer to classify a long-lived asset as held for sale if it was probable that the acquirer could meet the recognition criteria within three months of the acquisition date). Thus, the Board decided that an acquirer would have to meet all of the recognition criteria at the acquisition date to classify a long-lived asset as held for sale at that date.

Employee Benefit Obligations

  1. The Exposure Draft proposed an exception to the fair value measurement principle for obligations associated with defined benefit postretirement benefit plans. The Board affirmed that exception and also extended it to all employee benefit obligations (except for obligations associated with share-based payment arrangements, which the Board plans to consider at a later date). That is, all benefit obligations would be measured based on guidance in existing standards rather than fair value. If a standard allows employee benefit obligations to be measured or recognized in various ways, the acquirer should be required to measure those assumed obligations in a manner consistent with its existing accounting policies.

  2. The Board affirmed the proposed amendments to FASB Statements No. 87, Employers’ Accounting for Pensions, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, that would require an acquirer to recognize any changes to the acquiree’s employee benefit plans (such as amendments, curtailments, or terminations) that it expects to make as postcombination expenses rather than include such changes in the measurement of the assumed benefit plan obligations.

  3. The Board also discussed the measurement of obligations associated with multiemployer benefit plans assumed in a business combination. It decided that an acquirer should recognize an expected withdrawal liability from a multiemployer plan in accordance with the existing guidance in Statements 87 and 106—that is, if withdrawal from the plan is probable at the acquisition date.

Operating Leases

  1. The Board affirmed the implementation guidance proposed in the Exposure Draft under which an acquirer recognizes the rights and obligations related to an operating lease in which the acquiree is the lessee as a net amount rather than as a separate asset and a separate liability.

  2. The Board also affirmed the proposed requirement that an acquirer recognize an intangible asset or a liability if the terms of an acquired operating lease are favorable or unfavorable relative to market terms at the acquisition date.

  3. Several respondents to the Exposure Draft commented that an operating lease might have value for reasons other than terms that are favorable relative to market prices—most likely arising from a related intangible asset. The Board agreed with those respondents and decided that an acquirer should recognize such intangible assets in the same manner as other intangible assets acquired in a business combination.

Amendment of FSP FAS 123(R)-1. The Board decided to issue a proposed FSP to clarify the classification guidance in FSP FAS 123(R)-1, "Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R)," used to determine whether an entity should reassess the classification of an award when (1) an individual is no longer employed by the entity and (2) the entity performs an equity restructuring or business combination. The proposed FSP would amend FSP FAS 123(R)-1. Specifically, the term modification as used in that FSP would not include changes to the terms of the instrument in which (1) either there is no increase in value to the holders of the instrument or the change in the terms of the award is not done in contemplation of an equity restructuring or a business combination and (2) all holders of the same class of equity instruments are treated in a similar manner.

The Board also decided that:

  1. The guidance in the FSP should be applied as follows:

    1. If in applying Statement 123(R) an entity did so in a manner consistent with the provisions of the FSP, the entity would continue to apply the provisions in the FSP to prior periods.

    2. If an entity did not apply Statement 123(R) in a manner consistent with the provisions of the FSP, the entity would be required to retrospectively apply the provisions in the FSP to prior periods when those periods' financial statements are included for comparative purposes with current period financial statements.

    3. Early application of the FSP would be permitted in periods for which financial statements have not yet been issued.

  2. The comment period would be 30 days.

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


The following documents were issued on June 8, 2006:

  1. Proposed FSP FAS 123(R)-e, "Amendment of FASB Staff Position FAS 123(R)-1." Comments are requested by July 8, 2006.

  2. Joint FASB and AICPA Invitation to Comment, Enhancing the Financial Accounting and Reporting Standard-Setting Process for Private Companies. Comments are requested by August 15, 2006.


The following is a list of open meetings tentatively scheduled through July. 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.

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
Wednesday, July 5, 2006—FASB Board Meeting
Wednesday, July 5, 2006—FASB Education Session
Wednesday, July 12, 2006—FASB Board Meeting
Wednesday, July 12, 2006—FASB Education Session
Wednesday, July 19, 2006—FASB Board Meeting
Wednesday, July 19, 2006—FASB Education Session
Wednesday, July 26, 2006—FASB Board Meeting
Wednesday, July 26, 2006—FASB Education Session