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Action Alert No. 04-13
April 1, 2004
NOTICE OF MEETINGS
OPEN BOARD MEETING
(Board
meetings are available by audio webcast and telephone.)
Wednesday, April 7, 2004, 9:00 a.m.
- Business
combinations: purchase method procedures. The Board will discuss
certain issues related to the accounting for stock options in a business
combination. Additionally, the Board will discuss whether and how to
conform the initial measurement guidance in paragraphs 18–21 of FASB
Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, and the measurement guidance in the
proposed Statement. (Estimated 75-minute discussion.)
- Interpretation
of Statement 143. The Board will discuss whether FASB Statement
No. 143, Accounting for Asset Retirement Obligations, requires an
entity to recognize a liability for a legal obligation to perform asset
retirement activities when the retirement of the asset is conditional on
a future event. If the Board reaches an affirmative decision on that
issue, it will discuss the effective date and the transition
requirements for a proposed Interpretation. (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
Wednesday, April 7, 2004, immediately following the Board
meeting
The Board will hold an educational, non-decision-making session to
discuss topics that are anticipated to be discussed at the April 14, 2004
Board meeting. Those topics will be posted to the FASB calendar four
days prior to the education session.
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 hearings, and through other
communication channels. Decisions become final only after a formal written
ballot to issue a final Statement or Interpretation.
March 24, 2004 Board Meeting
Business
combinations: purchase method procedures. The Board decided that
as part of the Exposure Draft of the proposed Statement that would revise
FASB Statement No. 141, Business Combinations:
- A short-duration insurance contract claims liability assumed in a
business combination should be measured at fair value at the date of
acquisition, which is consistent with current guidance.
- A short-duration insurance contract claims liability assumed in a
business combination should have an expanded presentation that splits
the fair value of acquired short-duration insurance contracts into two
components:
- A liability measured in accordance with the insurer’s accounting
policies for short-duration insurance contracts that it issues
- An intangible asset, measured as the difference between the fair
value of the acquired short-duration insurance contracts and (a). That
intangible asset should be tested for impairment using the premium
deficiency test in FASB Statement No. 60, Accounting and Reporting
by Insurance Enterprises, and would be excluded from the
intangible asset impairment test in FASB Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
- Following the acquisition, assets and liabilities arising from
insurance contracts should be accounted for in accordance with existing
accounting guidance.
The Board also considered whether it is necessary to provide specific
guidance concerning the measurement of unearned premium liabilities
assumed in a business combination. The Board noted that recognizing and
measuring those liabilities at fair value is consistent with the
accounting for other similar performance obligations and that no specific
guidance is necessary.
Short-term
convergence: liability classification. The Board discussed a
possible expansion of the scope of this aspect of the short-term
convergence project to include a fundamental reconsideration of the
definitions of working capital and current assets in ARB No.
43, Chapter 3A, “Working Capital—Current Assets and Current Liabilities.”
The Board decided:
- Chapter 3A will be replaced entirely to (a) incorporate the
decisions reached in this project and (b) modernize the language and
incorporate more relevant and up-to-date examples for the guidance in
that Chapter that the Board did not reconsider. In drafting, the staff
seeks to use language similar to that used in IAS 1, Presentation of
Financial Statements, because that approach is consistent with the
objective of the short-term convergence project.
- Fundamental reconsideration of the definitions of working
capital and current assets in ARB 43, Chapter 3A will be
undertaken as part of the project on financial performance reporting by
business enterprises.
The Exposure Draft of the proposed Statement on balance sheet
classification of liabilities is now expected to be issued in the second
quarter of 2004.
Fair
value measurements. The Board discussed fair value measurement of
net open positions in dealer markets where bid and asked prices are more
readily and regularly available than closing prices. The Board clarified
that for net open positions, fair value should be determined by using (1)
mid-market prices for the matched portion of offsetting positions and (2)
bid and asked prices, as appropriate, for net open positions.
The Board authorized the staff to proceed to a draft of a proposed
Statement for vote by written ballot. The Board plans to hold a public
roundtable discussion with respondents to the proposed Statement at the
end of the comment period.
Qualifying
special-purpose entities and isolation of transferred assets. The
Board decided to hold a public roundtable discussion to seek additional
information from constituents about the impact of setoff rights on sale
accounting for transferred financial assets. The Board stated that the
scope of the roundtable should include other issues that may affect legal
isolation in addition to the issue of setoff rights. The Board expects to
hold the roundtable at the end of May.
The Board directed the staff to prepare a staff document that would be
posted to the FASB website in early April and that would summarize the
staff’s understanding of legal isolation issues and provide constituents
with the opportunity to comment. The Board decided that any comment
letters received on the staff document should be included in the public
record and posted to the FASB website.
The Board agreed that constituents invited to attend the roundtable
should be limited to lawyers, regulators, and rating agencies. However,
the Board directed the staff to make sure that accountants and auditors
are actively involved in the process and that the staff hold discussions
with accountants and auditors prior to the roundtable to identify any
issues from practice that should be addressed during the public
roundtable.
FASB DOCUMENTS AVAILABLE
On March 31, 2004, the Board issued the FASB Exposure Draft, Share-Based
Payments. Comments are requested by June 30, 2004. That Exposure
Draft can be downloaded from the FASB website. If you do not have access
to the Internet, you can receive a printed copy by calling the FASB Order
Department at 1-800-748-0659.
Also the third edition, Accounting for Derivative Instruments and
Hedging Activities, FASB Statement No. 133 as amended and interpreted
(as of February 10, 2004), is available by ordering online from the FASB website or by calling
the FASB Order Department.
FASB STAFF POSITION GUIDANCE
On March 31, 2004, a majority of the Board directed the staff to
release the proposed FSP FAS 141-a and FAS 142-a, “Interaction of FASB
Statements No. 141, Business Combinations, and No. 142, Goodwill
and Other Intangible Assets, and EITF Issue No. 04-2, "Whether Mineral
Rights Are Tangible or Intangible Assets and Related Issues," for a 15-day
comment period. Comments are requested by April 16, 2004.
Also, a majority of the Board did not object to the release of the
proposed FSP FAS 97-a, “Situations in Which Paragraphs 17(b) and 20 of
FASB Statement No. 97, Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized Gains and
Losses from the Sale of Investments, Permit or Require Accrual of an
Unearned Revenue Liability,” for a 30-day comment period. Comments are
requested by May 3, 2004.
Those proposed FSPs will be available on the FASB website by the close
of business on Friday, April 2, 2004.
FUTURE OPEN MEETINGS
The following is a list of open meetings tentatively scheduled through
May. 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.
Monday, April 12, 2004—User Advisory Council Meeting, New York
City
Tuesday, April 13, 2004—FASB Education Session
Wednesday, April
14, 2004—FASB Board Meeting
Wednesday, April 14, 2004—FASB Education
Session
Thursday, April 22, 2004—IASB/FASB Joint Board Meeting,
London
Friday, April 23, 2004—IASB/FASB Joint Board Meeting,
London
Wednesday, April 28, 2004—FASB Board Meeting
Wednesday, April
28, 2004—FASB Education Session
Wednesday, May 5, 2004—FASB Board
Meeting
Wednesday, May 5, 2004—FASB Education Session
Monday, May
10, 2004—Liaison Meeting with the American Petroleum Institute
Tuesday,
May 11, 2004—Small Business Advisory Committee Meeting
Wednesday, May
12, 2004—FASB Board Meeting
Wednesday, May 12, 2004—FASB Education
Session
Tuesday, May 18, 2004—Liaison Meeting with the Equipment
Leasing Association
Wednesday, May 19, 2004—FASB Board
Meeting
Wednesday, May 19, 2004—FASB Education Session
Wednesday,
May 26, 2004—FASB Board Meeting
Wednesday, May 26, 2004—FASB Education
Session
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