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Action Alert No. 04-45
November 18, 2004
NOTICE OF MEETINGS
OPEN BOARD MEETINGS
(Board
meetings are available by audio webcast and telephone.)
Monday, November 22, 2004, 9:00 a.m.
Equity-based
compensation. If necessary, the Board will continue its discussion
from its November 17, 2004 meeting on issues that have arisen during the
drafting of the final Statement. (Estimated 90-minute
discussion.)
Wednesday, November 24, 2004, 8:30 a.m.
The Board meeting will begin at 8:30 a.m. instead of 9:00
a.m.
- Financial
instruments: liabilities and equity. The Board will continue to
develop its approach (ownership/settlement approach) for distinguishing
liabilities and assets from equity for single component instruments by
discussing (a) characteristics of a direct ownership relationship and
(b) the impact of multiple settlement alternatives on the classification
of an instrument. (Estimated 60-minute discussion.)
- Business
combinations: purchase method procedures. The Board will discuss
certain issues identified by the staff in developing the joint FASB/IASB
business combinations Exposure Draft. The majority of those issues
relate to differences between FASB Statement No. 141, Business
Combinations, and IFRS 3, Business Combinations, which were
not reconsidered by the FASB and IASB jointly in this phase of the
project. The Board will consider whether it wants to explore conforming
those differences before issuing the joint Exposure Draft. (Estimated
60-minute discussion.)
- Short-term
international convergence: earnings per share. The Board will
consider computational guidance for applying the treasury stock method
to an instrument classified as a liability. (Estimated 30-minute
discussion.)
- Liability
extinguishment. The Board will discuss the application of the
liability extinguishment criteria contained in FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, to performance obligations.
(Estimated 60-minute discussion.)
- GAAP hierarchy. The Board will discuss whether to move the
GAAP hierarchy from the AICPA Statement on Auditing Standards No. 69,
The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles, to FASB literature and, if so, whether
the GAAP hierarchy should be modified. (Estimated 60-minute
discussion.)
- 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
No education session is planned for the week of November 22,
2004.
BOARD ACTIONS
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 or
Interpretation.
November 10, 2004 Board Meeting
Fair
value measurement. The Board discussed significant issues raised
by respondents to the FASB Exposure Draft, Fair Value Measurements,
including issues of relevance and reliability related to fair value
measurements, as a basis for deciding whether to proceed with its plans to
issue a final Statement. The Board decided to proceed with its plans to
issue a final Statement to provide needed guidance for applying the fair
value measurement requirements of existing pronouncements. The Board plans
to discuss issues of relevance and reliability raised by respondents in
its conceptual framework project.
The Board discussed the interaction of a final Statement (in
particular, Appendix A) and FASB Concepts Statement No. 7, Using Cash
Flow Information and Present Value in Accounting Measurements. The
Board decided to include Appendix A in the final Statement, but only with
respect to its application guidance for using present value techniques to
estimate fair value. The Board decided to revise that guidance to clarify
that the estimate should include an adjustment for risk if the amount is
significant, identifiable, and measurable. The Board will consider the
need to further clarify that guidance and revise Concepts Statement 7 at a
future meeting.
The Board discussed the definition of fair value and its application to
liabilities. The Board decided to revise the definition to refer (1) to
liabilities as being settled (not exchanged) and (2) to a liability as
being settled when the reporting entity (obligor) is no longer obligated
to perform, encompassing within the definition a transfer or legal layoff
notion for liabilities, subject to discussion at a future meeting of the
effect of applying the definition of fair value, as revised, under
existing pronouncements that require fair value measurements for
liabilities. The Board also affirmed the concept included in footnote 4 of
the Exposure Draft that for liabilities, estimates of fair value should
consider the effect of an entity’s credit standing, but it did not reach a
decision on whether to include that concept in the final Statement. The
Board plans to consider that issue at a future meeting, focusing on the
effect of applying that concept under existing pronouncements that require
fair value remeasurements for liabilities.
The Board clarified that the "current" transaction in the definition of
fair value does not refer to a forced or liquidation transaction; rather,
it refers to an orderly transaction (that is, a transaction that occurs at
the specified measurement date assuming a period that is usual and
customary for transactions involving such assets or liabilities, allowing
for adequate exposure to the market prior to that date). A current
transaction should reflect market conditions existing at the specified
measurement date, which is the effective valuation date.
As a basis for applying the definition of fair value, the Board decided
to incorporate in the final Statement a reference market notion that would
apply broadly to all estimates of fair value. The reference market is the
market in which the asset (or liability) being measured could be exchanged
(or settled), thereby representing the market that an entity looks to as a
basis for selecting the inputs used in the estimate. The Board generally
agreed that the entity should have the ability to currently access that
market in order to use some (or all) of the inputs in that market in the
estimate. The Board plans to further consider the access requirement for
reference markets at a future meeting, focusing on possible reference
markets for performance obligations.
FASB Staff Positions (FSPs). The Board discussed whether to
direct the staff to issue a proposed FSP to provide guidance on the
application of FASB Statement No. 109, Accounting for Income Taxes,
to the provision within the American Jobs Creation Act of 2004 (the Act),
which provides tax relief to U.S. domestic manufacturers. Additionally,
the Board discussed the accounting and disclosure requirements for a
one-time dividends received deduction on the repatriation of certain
foreign earnings (repatriation provision) provided for in the Act. More
specifically, the Board discussed whether to issue a proposed FSP to allow
preparers additional time to evaluate the effect of the repatriation
provision within the Act on an enterprise’s plan for reinvestment or
repatriation of foreign earnings for purposes of applying Statement
109.
The Board made the following decisions:
- The Board directed the staff to issue two proposed FSPs to address
each of the issues discussed above for U.S. domestic manufacturers and
the repatriation of certain foreign earnings.
- The U.S. domestic manufacturing deduction should be accounted for as
a special deduction under Statement 109.
- Enterprises should be allowed additional time beyond the financial
reporting period in which the Act was enacted to evaluate the effect of
the Act on an enterprise’s plan for reinvestment or repatriation of
foreign earnings for purposes of applying Statement 109.
- The FSP on the provision for unremitted earnings should apply to all
unremitted foreign earnings, not just historical unremitted earnings.
- The comment period for both proposed FSPs should be 15 days.
(Subsequent to this meeting, proposed FSP
FAS 109-a, "Application of FASB Statement No. 109, Accounting
for Income Taxes, for the Tax Deduction Provided to U.S. Based
Manufacturers by the American Jobs Creation Act of 2004," and FSP
FAS 109-b, "Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of
2004," were posted to the FASB website on November 15, 2004. Comments are
requested on both proposed FSPs by December 1, 2004.)
Agenda decisions. The Board discussed whether to add the
following limited-scope projects to its agenda and decided:
- To add a project to provide guidance on how subparagraph 11(d) of
FASB Statement No. 142, Goodwill and Other Intangible Assets,
should be evaluated in determining the useful life of renewable
intangible assets
- To add a project to amend the guidance for suspended well costs in
FASB Statement No. 19, Financial Accounting and Reporting by Oil and
Gas Producing Companies.
Although the Board decided to add those two projects to its agenda, it
did not decide what type of documents should be issued.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
December. All meetings are held in Norwalk, Connecticut, unless otherwise
noted. 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, November 30, 2004—FASB Board Meeting
Tuesday, November 30,
2004—FASB Education Session
Wednesday, December 1, 2004—Small Business
Advisory Committee Meeting
Thursday, December 2, 2004—Financial
Accounting Standards Advisory Council Meeting
Wednesday, December 8,
2004—FASB Board Meeting
Wednesday, December 8, 2004—FASB Education
Session
Friday, December 10, 2004—Liaison Meeting with the National
Investor Relations Institute
Monday, December 13, 2004—FASB
Education Session
Wednesday, December 15, 2004—FASB Board
Meeting
Wednesday, December 15, 2004—FASB Education
Session
Wednesday, December 22, 2004—FASB Board Meeting
Wednesday,
December 22, 2004—FASB Education Session
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