Action Alert No. 06-08
February 23, 2006


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

Wednesday, March 1, 2006, 8:00 a.m.

The Board Meeting will begin at 8:00 a.m. instead of 9:00 a.m.

  1. Conceptual framework (estimated 2-hour discussion). The Board will continue its discussion of issues relating to the definitions of elements of financial statements, focusing on the definitions of assets and liabilities.

  2. Revenue recognition (estimated 2-hour discussion). The Board will discuss two topics related to accounting for revenue contracts under the assets and liabilities approach: (a) accounting for wholly executory (or wholly unexecuted) revenue contracts and (b) assessing when performance has occurred.

  3. Business combinations (estimated 1.5-hour discussion). The Board will begin redeliberating the proposals in its June 2005 Exposure Draft, Business Combinations. The Board will discuss the definition of a business combination and the proposal to exclude the formation of a joint venture from the scope of a final Statement.

  4. Uncertain tax positions (estimated 1-hour discussion). The Board will consider certain application issues on the best estimate measurement attribute and whether additional work is necessary on alternative measurement attributes.

  5. Servicing of financial assets (estimated 15-minute discussion). The Board will consider whether separately recognized servicing assets should be accounted for as proceeds when a transferor that is also the servicer enters into a transaction that results in a separately recognized servicing asset.

  6. 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, March 1, 2006, 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 March 8, 2006 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


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.

February 15, 2006 Board Meeting

Hybrid financial instruments. The Board addressed transition guidance for existing bifurcated hybrid financial instruments. The Board decided:

  1. To accept the staff’s recommendation that a difference between the carrying value of components of a hybrid financial instrument and its fair value be recognized through an adjustment to the beginning balance of retained earnings in the period of adoption.

  2. To require disclosure of the gross amount of the adjustment to the beginning balance of retained earnings, clearly showing the gains and losses as a result of electing to measure hybrid financial instruments at fair value pursuant to the final Statement on accounting for certain hybrid financial instruments.

Agenda decision: derivatives and hedging. The Board decided to add to its agenda a project to address the following current practice issues related to the implementation of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.

  1. Whether a conversion option that incorporates foreign currency risk qualifies for the scope exception related to being indexed to the reporting entity’s own stock, thereby precluding the need to bifurcate the entity’s convertible debt

  2. Whether the functional currency variability in proceeds to be received from the forecasted issuance of debt denominated in a currency other than the reporting entity’s functional currency is eligible to be hedged in a cash flow hedge of foreign currency risk

  3. Clarification of existing guidance as to when it is permissible to designate the risk of changes in cash flows attributable to the changes in the designated benchmark interest rate as the hedged risk in a cash flow hedge of a variable-rate financial asset or liability (for example, auction rate notes issued by a health care entity)

  4. Clarification of existing guidance related to the application of the shortcut method.

The Board decided not to undertake project to amend Statement 133 to permit a bifurcation-by-risk approach for both fair value and cash flow hedges involving nonfinancial assets and liabilities.

Leveraged leases. The Board discussed the remaining issues on the proposed FSP FAS 13-a, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction.” The Board decided that:

  1. Advance payments and deposits made to the IRS or other taxing authorities should not be considered actual cash flows in the recalculation of the leveraged lease.

  2. The final FSP should not include a threshold for determining when a change in timing should trigger a recalculation.

  3. Changes in state apportionment factors should not be considered a change in timing but rather a change in net income and therefore should be accounted for in accordance with paragraph 46 of Statement 13. This will be noted in the basis for conclusions in the final FSP.

  4. The effective date and transition should be modified to be consistent with the Exposure Draft on uncertain tax positions.


The following is a list of open meetings tentatively scheduled through March. 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, March 8, 2006—FASB Board Meeting
Wednesday, March 8, 2006—FASB Education Session
Wednesday, March 15, 2006—FASB Board Meeting
Wednesday, March 15, 2006— FASB Education Session
Thursday, March 16, 2006—Emerging Issues Task Force Meeting
Wednesday, March 22, 2006—FASB Board Meeting
Wednesday, March 22, 2006—FASB Education Session
Thursday, March 23, 2006—Financial Accounting Standards Advisory Council Meeting
Wednesday, March 29, 2006—FASB Board Meeting
Wednesday, March 29, 2006—FASB Education Session