Action Alert No. 05-52
December 29, 2005


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

No Board meetings are planned for the week of January 2, 2006. The next scheduled Board meeting is Wednesday, January 11, 2006.


Wednesday, January 4, 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 the January 11, 2006 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education sessions.


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.

December 20, 2005 Board Meeting

Combinations of not-for-profit organizations. The Board decided to require that a not-for-profit organization that acquires a business or nonprofit activity through a merger or acquisition:

  1. Account for goodwill and inherent contributions received using a single approach. Under the approach, an acquirer would recognize either goodwill, to the extent that the consideration transferred is more than the identifiable net assets acquired, or a contribution received, to the extent that the consideration transferred is less than the identifiable net assets acquired.

  2. Consistent with the proposed FASB Statement on business combinations:

    1. Apply the fair value measurement principle for assets acquired and liabilities assumed, including its exceptions for assets held for sale, deferred taxes, operating leases, and certain employee benefits.

    2. Exclude transaction costs incurred in connection with a merger or acquisition from the measure of the fair value of the consideration transferred for the business or nonprofit activity. Those costs should be accounted for separately from the acquisition in accordance with applicable generally accepted accounting principles.

    3. Apply the guidance for the measurement period and determine what is part of the exchange.

    4. Apply the same disclosure requirements (paragraphs 71–73 and 75–81), to the extent that they apply. Those disclosure requirements include disclosure objectives and disclosures that are included in the proposed Statement on business combinations but not in FASB Statement No. 141, Business Combinations, such as the maximum potential amount of future payments for contingent consideration, the nature of any preexisting relationship, and a reconciliation of the beginning and ending balance of liabilities for contingent consideration and contingencies that are required to be measured at fair value.

    5. Disclose the information required by paragraph 74, if the acquirer is a public not-for-profit organization (including those organizations that have public debt obligations outstanding). Those disclosures are (1) the amounts of revenue and results of operations of the acquiree since the acquisition date, if practicable, and (2) the results of operations of the combined entity as if the acquisition had occurred at the beginning of the period, if practicable.

  3. Account for donor-related intangible assets consistent with guidance for customer-related intangible assets that is in the proposed Statement on business combinations.

  4. If it reports a performance indicator in accordance with the requirements of the AICPA Audit and Accounting Guide, Health Care Organizations, present any contribution inherent in a merger or acquisition separately from the performance indicator, unless the acquired business or nonprofit activity meets the criteria to be classified as held for sale in paragraph 32 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Additionally, the Board decided to:

  1. Provide a 120-day comment period for the Exposure Drafts resulting from this project.

  2. Conduct a public roundtable following the issuance of the Exposure Drafts.

  3. Link the required transition for all of the Board’s decisions on this project. That is, the proposed amendments to FASB Statement No. 142, Goodwill and Other Intangible Assets, and application guidance for noncontrolling interests would be effective in the same period as the mergers and acquisitions portion of the proposal.

  4. Apply the provisions to all mergers and acquisitions for which the acquisition date is on or after the effective date, rather than all acquisitions initiated after the effective date.

  5. Provide a period of about six months between the effective date and the issuance of the final Statement.

  6. Apply the provisions in fiscal years beginning after the effective date.

  7. Encourage early adoption of the provisions as long as the provisions of all of the documents (mergers and acquisitions, amendments to Statement 142, and accounting for noncontrolling interests, if applicable) are applied at the same time.

Insurance risk transfer. The Board directed the staff to further develop approaches for bifurcating insurance and reinsurance contracts into financing and insurance components. The Board approved the issuance of an Invitation to Comment (a neutral staff discussion document) soliciting constituent feedback on bifurcation approaches and related implementation issues. The Invitation to Comment is scheduled for issuance in the first quarter of 2006.

Servicer discretion. The Board decided to add a project to its agenda to provide interpretive guidance with respect to the passive nature of a qualifying special-purpose entity (SPE). Specifically, the Board decided:

  1. That the project should attempt to provide clarification and guidance related to paragraph 35(b) of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, in a principles-based fashion.

  2. The fact patterns discussed below should be used as examples of the application of the principles-based guidance developed to demonstrate how one should evaluate the activities that are permitted for a qualifying SPE.

  3. To issue the interpretive guidance as an FSP.

The following activities were presented to the Board as examples of activities for which interpretive guidance may be useful as constituents have different views as to whether these activities are appropriate for a servicer considering the provisions of paragraph 35(b):

  1. The ability to waive a due-on-sale provision

  2. The substitution of collateral with respect to a loan held by a qualifying SPE

  3. The permitted activities in connection with a sale of real estate temporarily held by a qualifying SPE.

The Board agreed to the staff’s recommendation to form a working group consisting of representatives of the commercial and residential mortgage securitization industry, the accounting firms, the Public Company Accounting Oversight Board, the banking regulators, and the SEC to solicit information and provide input to the staff prior to presenting any recommendations to the Board.


Your input requested for the Codification retrieval system—We are capturing feedback for the planned FASB codification retrieval system for nongovernmental entities. The web-based survey takes about 5–10 minutes to complete and will provide us with very important feedback as we develop our list of requirements. Thanks in advance for your assistance!


The following document was issued and is available on the FASB website:

Final FSP AAG INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans” (December 29, 2005).


The following is a list of open meetings tentatively scheduled through February. 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, January 11, 2006—FASB Board Meeting
Wednesday, January 11, 2006—FASB Education Session
Wednesday, January 18, 2006—FASB Board Meeting
Wednesday, January 18, 2006—FASB Education Session
Wednesday, January 25, 2006—FASB Board Meeting
Wednesday, January 25, 2006—FASB Education Session
Monday, January 30, 2006—Liaison Meeting with American Bar Association
Wednesday, February 1, 2006—FASB Board Meeting
Wednesday, February 1, 2006—FASB Education Session
Wednesday, February 8, 2006—FASB Board Meeting
Wednesday, February 8, 2006—FASB Education Session
Wednesday, February 15, 2006—FASB Board Meeting
Wednesday, February 15, 2006—FASB Education Session
Wednesday, February 22, 2006—FASB Board Meeting
Wednesday, February 22, 2006—FASB Education Session