Summary of Board decisions 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 an Accounting Standards Update.

September 5, 2012 FASB Board Meeting

Insurance contracts. The Board continued its discussions on insurance contracts by considering whether the single margin measured at the initial recognition of the contract should subsequently be unlocked for changes in estimates of cash flows used to measure the insurance liability or for a portfolio of onerous contracts.

The Board tentatively decided that:

  1. The single margin on a portfolio of contracts should not be unlocked for changes in actual or expected cash flows, and, instead, such changes should be reported in the income statement immediately.
  2. If an insurer determines that a portfolio of contracts is onerous, an additional liability (measured as the present value of future payments for benefits and related settlement and maintenance costs less the present value of future gross premiums less the insurance contract liability) should be recognized with a corresponding offset to eliminate any remaining margin. If the additional liability exceeds the remaining margin, an insurer would recognize an expense for the excess amount.
  3. The write-off of the single margin on contracts deemed onerous may not be reversed in future periods.

Next Steps

The Board will continue its discussion of insurance contracts in the week beginning September 17, 2012.

Investment companies. The Board discussed whether mortgage real estate investment trusts (REITs) that meet the requirements to be an investment company should follow investment company guidance or whether the REIT scope exception in Topic 946, Financial Services—Investment Companies, should be retained for mortgage REITs.

The Board decided to remove the scope exception in Topic 946 for mortgage REITs and require a mortgage REIT that meets the requirements to be an investment company to follow investment company guidance.

The Board requested the staff to analyze further whether the Board should consider (1) defining equity REITs for purposes of providing an equity REIT scope exception or (2) removing the REIT scope exception also for equity REITs.

Transfers and servicing: repurchase agreements and similar transactions. The Board discussed new disclosures that would be required for repurchase agreements and similar transactions in light of decisions reached to date in this project. The Board decided that for repurchase agreements and similar transactions that are accounted for as secured borrowings, an entity would disclose a disaggregation of the carrying value of the borrowing (the liability) based on the type of collateral pledged.

The Board also decided that at each balance sheet date an entity would disclose a quantification of the amount of repurchase agreements and similar transactions that are not accounted for as secured borrowings during the reporting period because the financial assets specified under the forward repurchase agreement are determined to be not substantially the same as the financial assets transferred at inception of the arrangement. To the extent that the amount of such agreements has changed significantly since the previous balance sheet date, the entity also would disclose the reason(s) for the change.

Accounting for financial instruments: classification and measurement.

Request to Accelerate Decision on Presentation of Changes in Fair Value Attributable to Changes in Own Credit Risk

The Board discussed whether to accelerate the Board´s tentative decision in the classification and measurement project regarding the presentation of changes in fair value attributable to changes in own credit risk for financial liabilities for which the fair value option has been elected. The Board decided not to accelerate the implementation of its tentative decision on the presentation of changes in own credit risk in other comprehensive income.

Measurement of Foreign Currency Gain or Loss on Foreign Currency Denominated Debt Instruments Classified at FVOCI

The Board discussed the measurement of foreign currency gain or loss on foreign currency denominated debt instruments classified at fair value through other comprehensive income (FVOCI). The Board decided that an entity should calculate the measurement of the foreign currency gain or loss using a method based on fair value of the instrument, for example, by measuring the instrument at fair value in the foreign currency times the difference between the end of period spot exchange rate and the beginning of the period spot exchange rate. Other fair-value-based approaches would also be appropriate, and the method would be applied consistently period over period. Investment companies would continue to apply the method in Subtopic 946-830, Financial Services—Investment Companies—Foreign Currency Matters.