Action Alert No. 05-48
December 1, 2005


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

Wednesday, December 7, 2005, 9:00 a.m.

  1. Transfers of financial assets. The Board will discuss whether it agrees with the listing of issues to be redeliberated identified through the staff’s analysis of comment letters received on its Exposure Draft, Accounting for Transfers of Financial Assets. The Board also will address the timing of the issuance of the final Statement and whether the Board wishes to address the issue of measurement of beneficial interests in connection with its project on servicing rights or whether it wishes to continue to address it in connection with this transfers project. (Estimated 90-minute discussion.)

  2. Financial performance reporting by business entities. The Board will discuss whether to proceed with the issuance of an Exposure Draft of a proposed Statement relating to the issues in Segment A of this project. (Estimated 45-minute discussion.)

  3. Nontraditional loan products. The Board will discuss comment letters received on proposed FSP SOP 94-6-a, "Nontraditional Loan Products." The Board will focus on issues concerning the definition of a nontraditional loan product and the transition provisions for the final FSP. (Estimated 45-minute discussion.)

  4. Fair value option. The Board will discuss several issues regarding the fair value option, including disclosures and the effective date and transition provisions. (Estimated 60-minute discussion.)

  5. 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.


Wednesday, December 7, 2005, following the Board meeting
Thursday, December 8, 2005, 9:00 a.m.

The Board will hold educational, non-decision-making sessions to discuss topics that are anticipated to be discussed at the December 14, 2005 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


Thursday, December 8, 2005, 1:00 p.m.

The Board will meet with representatives of the Committee for Improved Corporate Reporting of the New York Society of Security Analysts to discuss matters of mutual interest.


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.

November 22, 2005 Board Meeting

Uncertain tax positions. The Board decided:

  1. The provisions of the final Interpretation will apply broadly to all tax positions taken by an enterprise.
  2. It will not deliberate issues concerning the uncertainty over new legislation in this project.
  3. The final Interpretation will not prescribe a specific unit of account to be used by an enterprise. The final Interpretation will indicate that the appropriate unit of account is a matter of facts and circumstances and should be based on the manner in which the enterprise supports and documents its tax return and the level at which issues are addressed with taxing authorities.
  4. An entity should presume that a taxing authority will examine a tax position when evaluating the position for recognition and measurement; therefore, consideration of the risk of examination is not appropriate.
  5. It will adopt a benefit recognition model with a two-step approach, a more-likely-than-not recognition criterion, and a best-estimate measurement attribute. In applying the provisions of the Interpretation, there will be distinct recognition and measurement evaluations. The first step is evaluating the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is the measurement of the appropriate amount of the benefit to recognize. The amount of benefit to recognize will be measured using the best estimate of the amount that will be sustained. The term best estimate is used consistent with the use of the term in FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements, which is similar to the statistical mode. The tax position should be derecognized when it is no longer more likely than not of being sustained.

Fair value option. The Board discussed several issues pertaining to the scope of the project and election of the fair value option. The Board decided:

  1. The project should be split into two phases. Phase one will address creating a fair value option for financial assets and financial liabilities. Phase two will address creating a fair value option for selected nonfinancial items.
  2. The liability for income taxes (both current and deferred) should be explicitly excluded from the scope of the project.
  3. Forward contracts that involve only financial instruments and that would otherwise not be recognized at inception under existing generally accepted accounting principles should not be excluded from the scope of the project’s first phase.
  4. The fair value option election can be applied by nonpublic entities that have elected the exception in FASB Statement No. 126, Exemption from Certain Required Disclosures about Financial Instruments for Certain Nonpublic Entities, from being required to disclose the fair value of all financial instruments.

The Board also affirmed that the fair value option election should be made upon initial recognition of the applicable financial asset or financial liability, is irrevocable, and should be documented concurrently. The application of new basis accounting would constitute the initial recognition of a financial asset or liability.


At its November 22, 2005 meeting, the EITF Agenda Committee added a new issue to the EITF Agenda on accounting for the deferred compensation and postretirement benefit aspects of split-dollar life insurance arrangements.

The Committee also decided not to reconsider EITF Issue No. 04-6, "Accounting for Stripping Costs Incurred during Production in the Mining Industry." However, the Agenda Committee agreed with the FASB staff that the production period does not yet commence if only incidental mineral material has been removed. Therefore, the FASB staff will clarify the language in Issue 04-6 to address the removal of overburden and waste that includes incidental mineral material.

In addition, the Agenda Committee decided to cancel the January 6, 2006 EITF meeting due to an insufficient number of agenda items. The next scheduled meeting of the EITF is March 15-16, 2006.


The following is a list of open meetings tentatively scheduled through January. 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.

Tuesday, December 13, 2005—FASB Education Session
Wednesday, December 14, 2005—FASB Board Meeting
Wednesday, December 14, 2005—FASB Education Session
Tuesday, December 20, 2005—FASB Board Meeting
Wednesday, December 21, 2005—FASB Board Meeting
Wednesday, December 21, 2005—FASB Education Session
Wednesday, December 28, 2005—No FASB Board Meeting or Education Session scheduled
Wednesday, January 4, 2005—FASB Board Meeting
Wednesday, January 4, 2006—FASB Education Session
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