Action Alert No. 07-43
October 25, 2007
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board meetings are available by audio webcast and telephone.)
Wednesday, October 31, 2007, 9:00 a.m.
- Financial statement presentation (estimated 90-minute discussion). The Board will readdress the issues of classified statement of financial position, capital management disclosures, and netting on the statement of cash flows. The Board also will discuss issues related to application of the cohesiveness principle. Those issues include classification and presentation of dividends payable, foreign currency translation adjustments, and the effects of basket transactions (a single transaction that involves multiple assets, or a combination of assets and liabilities, that would be classified in more than one category under the working format).
- Valuation of nonfinancial assets and emission allowances that are acquired for resale (estimated 45-minute discussion). The Board will discuss accounting alternatives for requiring trading inventory positions at fair value.
- Agenda decision: not-for-profit endowment and UPMIFA (estimated 45-minute discussion). The Board will discuss whether to add a project to its agenda to address the need for potential accounting and reporting guidance for not-for-profit organizations concerning donor-restricted endowment funds in response to the model Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA), which is gradually being adopted by individual states.
- 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, October 31, 2007, following the Board meeting
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.
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, FSP, or Statement 133 Implementation Issue.
October 17, 2007 Board Meeting
Conceptual framework: elements and recognition. The Board continued its discussions of a working definition of an asset“An asset is a present economic resource to which the entity has a present right or other privileged access”to replace the existing definition of an asset“Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.”
The Board tentatively decided to:
- Focus the definition of an asset on a present economic resource, rather than on future economic benefits.
- Remove the assessment of likelihood from the existing definition of an asset.
- Focus the definition on the present rather than on past transactions or other events.
- Ask the staff to clarify the linkage between the entity and the economic resource, preferably without using the word control.
The IASB reached similar decisions at its meeting on October 16, 2007. The IASB and FASB will continue to discuss wording of the definition at their joint meeting on October 22-23, 2007.
Accounting for leases. The Board discussed a staff analysis of lease arrangements, which include lessee obligations to incur costs to return the leased item, return the leased item in a specified condition, and maintain the leased item.
The Board considered whether these obligations meet the definition of a liability and, if so, when the liability arises. The Board also considered how the debit arising upon recognition of the liability should be treated, how the liability should be measured, and whether these obligations give rise to assets for the lessor.
The Board discussed a staff analysis of lease payments with a variable factor based on price changes or an index, the lessee’s financial or operating performance from the leased item, and the lessee’s use of the leased item.
The Board considered whether these variable lease payments meet the definition of a liability and, if so, when the liability arises and how it should be measured.
The meeting was informational, and no decisions were reached.
Statement 133 hedging. The Board discussed a fair value hedge accounting approach that would eliminate many elements that exist under the current hedge accounting model in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, including bifurcation-by-risk, the shortcut method, critical terms match, and the requirement to quantitatively assess effectiveness in order to qualify for hedge accounting. The discussion focused on fair value hedging relationships and the approach was discussed in the context of scope, requirements for hedge accounting, and measurement of the hedged item.
The Board decided to retain fair value hedge accounting for items currently within the scope of Statement 133 and to require a principles-based evaluation of effectiveness that would permit a qualitative assessment of effectiveness in many situations. The Board agreed to permit hedge accounting after initial recognition of the asset or liability and also to allow entities to dedesignate and redesignate a hedging relationship at any time. The Board agreed that the carrying value of the hedged item should be adjusted for changes in fair value during the hedge period.
The Board directed the staff to further research alternatives for accounting for the credit component of changes in fair value when an entity is hedging its own issued debt. Additionally, the Board directed the staff to further research a potential method for separately reporting the cumulative changes in fair value of the hedged item and its balance sheet carrying value.
Agenda decision: deferral of the effective date of Statement 157. The Board decided not to add a project to its agenda to defer the effective date of FASB Statement No. 157, Fair Value Measurements, in its entirety. However, the Board directed the staff to evaluate other potential deferral alternatives including a deferral for (1) all assets and liabilities except financial assets and liabilities and derivatives subject to the scope of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, (2) private entities, and/or (3) “small” entities. The Board will discuss those alternative deferral options at a future Board meeting.
Agenda decision: deferral of the effective date of SOP 07-1. The Board added a project to its agenda to indefinitely defer the effective date of AICPA Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. For entities that have not yet adopted the provisions of SOP 07-1, early adoption would not be permitted. The Board directed the staff to prepare a draft of a proposed FSP for vote by written ballot. The Board decided that the proposed FSP should have a 30-day comment period.
EITF AGENDA DECISIONS
At its October 15, 2007 meeting, the EITF Agenda Committee discussed the following proposed new issues and made the following decisions:
- Accounting for Lending CommitmentsThis issue was not added to the EITF agenda.
- Accounting for Value beyond Proven and Probable Reserves in a Business CombinationThis issue was not added to the EITF agenda.
- Measurement Date Approach for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or ServicesA decision on whether to add this issue to the EITF agenda was deferred pending further research by the FASB staff.
- Determining Whether Payments to Incentive Distribution Rights Holders in Master Limited Partnerships Represent Equity Distributions or Compensation ExpenseThis issue was not added to the EITF agenda.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through December. 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, November 7, 2007FASB Board Meeting
Wednesday, November 7, 2007FASB Education Session
Tuesday, November 13, 2007Investors Technical Advisory Committee Meeting
Wednesday, November 14, 2007FASB Board Meeting
Wednesday, November 14, 2007FASB Education Session
Friday, November 16, 2007Liaison Meeting with Chartered Financial Analysts Institute
Wednesday, November 21, 2007FASB Board Meeting
Wednesday, November 21, 2007FASB Education Session
Wednesday, November 28, 2007FASB Board Meeting
Thursday, November 29, 2007Emerging Issues Task Force Meeting
Wednesday, December 5, 2007FASB Board Meeting
Wednesday, December 5, 2007FASB Education Session
Thursday, December 6, 2007Financial Accounting Standards Advisory Council Meeting
Friday, December 7, 2007Small Business Advisory Committee Meeting
Wednesday, December 12, 2007FASB Board Meeting
Wednesday, December 12, 2007FASB Education Session
Wednesday, December 19, 2007FASB Board Meeting
Wednesday, December 19, 2007FASB Education Session
FASB Meetings Available by Audio Webcast and Telephone
To monitor available live meetings free of charge by audio webcast, access the link http://www.trz.cc/fasb/live.html. 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 http://www.trz.cc/fasb/archive.html. 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.