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Action Alert No. 06-25
June 22, 2006
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, June 28, 2006, 9:00 a.m.
- Fair
value measurements (estimated 60-minute discussion). The
Board will discuss issues raised in drafting the final Statement on fair
value measurements, including transition and disclosure issues.
- FASB
ratification of EITF consensuses and tentative conclusions
(estimated 15-minute discussion). The Board will consider the
ratification of the consensuses and tentative conclusions reached at the
June 15, 2006 EITF meeting. (See discussion under EITF ACTIONS.)
- 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, June 28, 2006, 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.
OPEN ROUNDTABLE DISCUSSIONS WITH RESPONDENTS TO THE FASB EXPOSURE
DRAFT ON POSTRETIREMENT BENEFITS
(These
roundtable discussions are available by audio webcast and
telephone.)
Tuesday, June 27, 2006, 9:00 a.m. – 12:00 p.m.
Tuesday, June 27,
2006, 1:00 p.m. – 4:00 p.m.
The Board will hold public roundtable discussions to listen to the
views of and obtain information from respondents to the March 31, 2006
FASB Exposure Draft, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans.
BOARD ACTIONS
No Board meetings were held during the week of June 12,
2006.
EITF ACTIONS
June 15, 2006 EITF Meeting
The Task Force discussed the following issues:
- Issue No. 05-1, "Accounting for the Conversion of an Instrument That
Became Convertible upon the Issuer's Exercise of a Call Option." The
Task Force affirmed as a consensus the tentative conclusion that the
issuance of equity securities to settle an instrument that, as of its
issuance date, contains a substantive conversion feature should be
accounted for as a conversion. That is, no gain or loss should be
recognized related to the equity securities issued to settle the
instrument. Additionally, the issuance of equity securities to settle an
instrument that, as of its issuance date, does not contain a substantive
conversion feature should be accounted for as a debt extinguishment.
That is, the fair value of the equity securities issued should be
considered a component of the reacquisition price of the debt. The Task
Force also affirmed as a consensus the tentative conclusion that 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)," should
be amended to clarify that Issue 03-7 does not apply to settlements
within the scope of Issue 05-1. The Board will consider the ratification
of those consensuses at its June 28, 2006 meeting.
- 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 Task
Force reached a tentative conclusion that the service provider should
characterize the consideration it provides to a third-party manufacturer
or reseller (that is not a customer of the service provider) based on
the form of the consideration directed to be provided to the service
provider's customer. If the form of the consideration is stipulated to
be anything other than "cash," then the form of consideration should be
characterized as "other than cash" for purposes of applying Issue No.
01-9, "Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products)." If the service
provider does not ultimately control the form of the consideration
provided to the service provider's customer, then the form of the
consideration should be characterized as "other than cash" for purposes
of applying Issue 01-9. If the consideration given by a service provider
can be linked contractually to the benefit received by the service
provider's customer, it is in substance the same as consideration given
to a service provider's customer. The Task Force also reached a
tentative conclusion that when the equipment is necessary for the
service provider's customer to receive a service from the service
provider and the consideration can be linked to the benefit received by
the service provider's customer, that consideration should be accounted
for in accordance with the model in Issue 01-9. The Board will consider
the ratification of that tentative conclusion at its June 28, 2006
meeting. If ratified, a draft abstract will be posted to the FASB
website for a 30-day comment period. This Issue will be discussed
further at a future meeting.
- Issue No. 06-2, "Accounting for Sabbatical Leave and Other Similar
Benefits Pursuant to FASB Statement No. 43." The Task Force affirmed as
a consensus the tentative conclusion that an employee's right to a
compensated absence under a sabbatical leave (or other similar benefit
arrangement) that requires a service period and does not increase its
benefit with additional years of service, accumulates pursuant to
paragraph 6(b) of FASB Statement No. 43, Accounting for Compensated
Absences, for arrangements in which the individual continues to be a
compensated employee and is not required to perform duties for the
entity during the absence. Therefore, assuming all of the other
conditions of paragraph 6 of Statement 43 are met, compensation
associated with a sabbatical leave or other similar benefit arrangement
should be accrued over the requisite service period. The Board will
consider the ratification of that consensus at its June 28, 2006
meeting.
- Issue No. 06-3, "Disclosure Requirements for Taxes Assessed by a
Governmental Authority on Revenue-Producing Transactions." The Task
Force reached a consensus that the scope of this Issue includes any tax
assessed by a governmental authority that is imposed concurrently on a
specific revenue-producing transaction between a seller and a customer.
In addition, the scope excludes taxes that are assessed on gross
receipts or that are an inventoriable cost. The Task Force also affirmed
as a consensus the tentative conclusion that the presentation of taxes
on either a gross basis or a net basis within the scope of this Issue is
an accounting policy decision that should be disclosed pursuant to APB
Opinion No. 22, Disclosure of Accounting Policies. A company
should disclose the amount of those taxes that is recognized on a gross
basis in interim and annual financial statements for each period for
which an income statement is presented if those amounts are significant.
The Board will consider the ratification of those consensuses at its
June 28, 2006 meeting.
- Issue No. 06-4, "Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements." The Task Force reached a tentative conclusion
that for a split-dollar life insurance arrangement that is in substance
an endorsement type of policy, an employer should recognize a liability
for future benefits in accordance with FASB Statement No. 106,
Employers’ Accounting for Postretirement Benefits Other Than
Pensions, or APB Opinion No. 12, Omnibus Opinion—1967,
(depending on whether a substantive plan is deemed to exist) based on
the substantive agreement with the employee. The Board will consider the
ratification of that tentative conclusion at its June 28, 2006 meeting.
If ratified, a draft abstract will be posted to the FASB website for a
30-day comment period. This Issue will be discussed further at a future
meeting.
- 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." The Task Force reached a
tentative conclusion that a policyholder should consider any additional
amounts included in the contractual terms of the insurance policy in
determining the "amount that could be realized under the insurance
contract." The Task Force agreed that contractual limitations should be
considered when determining the realizable amounts. Those amounts that
are recoverable by the policyholder at the discretion of the insurance
company should be excluded from the amount that could be realized. The
Task Force also agreed that recoverable amounts that are long term in
nature may need to be recognized at their present value depending on the
nature of the arrangement. Those amounts should be determined by an
entity at the individual-life-policy (or certificates in a group policy)
level and should also include any amount that is realized by the
policyholder upon the assumed surrender of the final policy. The Board
will consider the ratification of that tentative conclusion at its June
28, 2006 meeting. If ratified, a draft abstract will be posted to the
FASB website for a 30-day comment period. This Issue will be discussed
further at a future meeting.
- Issue No. 06-6, "Application of EITF Issue No. 05-7." The Task Force
agreed to consider application issues related to Issue 05-7, "Accounting
for Modifications to Conversion Options Embedded in Debt Instruments and
Related Issues," due to a concern about the accounting for modifications
that decreased the value of (or that eliminated) an embedded conversion
option. The Task Force will discuss this Issue at a future meeting and
consider alternative models for determining whether a substantial
modification occurs under Issue No. 96-19, "Debtor's Accounting for a
Modification or Exchange of Debt Instruments" (as amended by Issue
05-7).
FUTURE OPEN MEETINGS
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 5, 2006—FASB Board Meeting (Canceled)
Wednesday, July 5, 2006—FASB
Education Session (Canceled)
Monday, July 10, 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
Wednesday, August 2, 2006—FASB Board Meeting
Wednesday,
August 2, 2006—FASB Education Session
Friday, August 4, 2006—Liaison
Meeting with the Financial Managers Society
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
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