Summary of Board decisions 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 an Accounting Standards Update.

May 4, 2011 FASB Board Meeting

Accounting for financial instruments. The Board discussed the characteristics of the instrument criterion for classifying and measuring financial instruments. The Board decided that a financial instrument that does not meet the following criterion would be measured at fair value with all changes in fair value recognized in net income:

    It is a debt instrument held or issued with all of the following characteristics:
  1. It is not a financial derivative instrument subject to the guidance in Topic 815, Derivatives and Hedging.
  2. There is an amount transferred to the debtor (issuer) at inception that will be returned to the creditor (investor) at maturity or other settlement, which is the principal amount of the contract adjusted by any discount or premium at acquisition.
  3. The debt instrument cannot contractually be prepaid or otherwise settled in such a way that the investor would not recover substantially all of its initial investment, other than through its own choice.
A financial instrument that meets the criterion above would then be classified and measured on the basis of an entity’s business strategy, as defined at previous meetings. The Board noted that trade receivables and payables would generally meet the criterion above.

The Board also discussed the classification and measurement of convertible debt instruments from the issuer’s perspective that qualify for the exception in paragraph 815-10-15-74(a) and do not require separation under paragraph 470-20-25-12. The Board decided that those convertible debt instruments should be measured at amortized cost in their entirety. This decision would not affect the classification and measurement of convertible debt instruments that require bifurcation under current U.S. GAAP.