Action Alert No. 06-27
July 6, 2006


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

Wednesday, July 12, 2006, 9:00 a.m.

  1. Postretirement benefit obligations, including pensions (estimated 1-hour discussion). The Board will discuss issues related to its March 31, 2006 Exposure Draft, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. Specifically, the Board will discuss the project’s objectives, scope, and transition method.

  2. 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.


Monday, July 10, 2006, 10:30 a.m.
Wednesday, July 12, 2006, following the Board meeting

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the July 19, 2006 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


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.

June 28, 2006 Board Meeting

Fair value measurements. The Board discussed comments received from certain external reviewers of a draft of the final FASB Statement on fair value measurements regarding the application of a market-participant approach to nonfinancial assets and nonfinancial liabilities measured at fair value in business combinations and impairment tests. The Board unanimously agreed to add a project to its agenda to address the diversity in practice that has arisen with respect to the use of entity-specific assumptions, rather than market-participant assumptions, to measure the fair value of nonfinancial assets and nonfinancial liabilities under 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. The guidance will be in the form of an FSP.

In addition, the Board discussed the following issues raised by external reviewers of a draft of the final Statement on fair value measurements.

  1. The Board affirmed but clarified the current definition of fair value to refer to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

  2. The Board clarified that inputs to valuation techniques should reflect the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. In the absence of observable inputs, a fair value measurement should be determined using unobservable inputs reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances, including the reporting entity’s own data provided that no contrary data indicate that market participants would use different assumptions.

  3. The Board decided to remove the guidance from the draft Statement for offsetting long and short positions in the same instrument.

  4. The Board decided to require qualitative disclosures about unobservable inputs used for nonrecurring fair value measurements within Level 3 (including a description of the inputs and the information used to develop the inputs).

  5. The Board decided to allow derivative assets and liabilities measured within Level 3 to be presented net for purposes of disclosures of changes in those beginning and ending balances reported in the statement of financial position.

  6. For financial instruments subject to limited retrospective application, the Board decided to remove the requirement to disclose information about the effect of the change in accounting in the fiscal year in which the final Statement is initially applied. The Board clarified that the transition adjustment should be determined in a single step based on the difference between the carrying amount and the fair value of those instruments at the date the final Statement is initially applied and recognized as a cumulative-effect adjustment to the opening balance of retained earnings for that fiscal year.

Issuance of a final Statement is pending, subject to the Board’s deliberations in its related FSP project to consider practice issues relating to the application of the fair value measurement objective under particular existing pronouncements.

FASB ratification of EITF consensuses and tentative conclusions. The Board considered and ratified the consensuses on the following issues reached at the June 15, 2006 EITF meeting:

  1. Issue No. 05-1, "Accounting for the Conversion of an Instrument That Became Convertible upon the Issuer’s Exercise of a Call Option" (including related modifications to Issue No. 03-7, "Accounting for the Settlement of the Equity-Settled Portion of a Convertible Debt Instrument That Permits or Requires the Conversion Spread to Be Settled in Stock (Instrument C of Issue No. 90-19)")

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

  3. 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)."

The Board also considered and ratified the tentative conclusions on the following issues reached at the June 15, 2006 EITF meeting. The Board also approved the exposure of a draft abstract for each of these issues for a 30-day public comment period. The draft abstracts are expected to be posted to the FASB website after July 6, 2006.

  1. 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"

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

  3. 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."


FASB Preliminary Views, Conceptual Framework for Financial Reporting: Objective of Financial Reporting and Qualitative Characteristics of Decision-Useful Financial Reporting Information, was issued on July 6, 2006 and is available on the FASB website. Comments are requested by November 3, 2006.


The following is a list of open meetings tentatively scheduled through August. 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, 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
Wednesday, August 2, 2006—FASB Board Meeting
Wednesday, August 2, 2006—FASB Education Session
Wednesday, August 9, 2006—FASB Board Meeting
Wednesday, August 9, 2006—FASB Education Session
Wednesday, August 16, 2006—FASB Board Meeting
Wednesday, August 16, 2006—FASB Education Session
Wednesday, August 23, 2006—FASB Board Meeting
Wednesday, August 23, 2006—FASB Education Session
Monday, August 28, 2006—Liaison Meeting with Edison Electric Institute and American Gas Association
Wednesday, August 30, 2006—FASB Board Meeting
Wednesday, August 30, 2006—FASB Education Session

FASB Meetings Available by Audio Webcast and Telephone

To monitor available live meetings free of charge by audio webcast, access the link To monitor by telephone, call 1-800-846-4717. You will be charged $.45 per minute, and VISA, MasterCard, American Express, or Discover Card is required. To listen to a recording of the most recent Board meeting via webcast free of charge, access the link To listen to a recording by telephone, for a charge of $.45 per minute, call 1-800-462-0393. Questions can be directed to 1-800-846-4630.

Handouts distributed to the audience at Board meetings are posted to our website one-half hour before the start of the meeting. A synopsis of each issue to be discussed at EITF meetings also is posted to this website.

Education sessions are not available by audio webcast or telephone, and no handouts are distributed to the audience.