SUMMARY OF BOARD DECISIONS
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.
February 3, 2011 FASB Board MeetingInsurance
contracts. The FASB invited speakers from the American Academy of
Actuaries to present an informational session on potential discount rates for
the measurement of insurance contracts. The IASB's Exposure Draft, Insurance
Contracts, and the FASB's Discussion Paper, Preliminary Views on
Insurance Contracts, were consistent about the determination of the
discount rate, which begins with a risk-free interest rate and adds an
adjustment for illiquidity (referred to as a bottom-up approach). The guest
speakers (William Hines and Stephen Strommen) provided a presentation on
insurance companies’ views of pricing and an expected portfolio rate less
defaults and other risks (referred to as a top-down approach). The presentation
attempted to portray that, in theory, either methodology would generate an
appropriate discount rate.
No decisions were made.
debt restructuring. The Board redeliberated issues raised by
respondents to the proposed Accounting Standards Update, Receivables (Topic
310): Clarifications to Accounting for Troubled Debt Restructurings by
Creditors, and decided that the project should continue according to the
technical plan. The Board tentatively decided that:
The Board also affirmed
its decisions that:
- Paragraph 310-40-15-8A of the proposed Update should be modified to
specify that the absence of a market rate for a loan with risks similar to the
restructured loan is an indicator of a troubled debt restructuring, but not a
determinative factor, and that this provision should be enhanced by noting
that the assessment should consider all of the modified terms of the
restructuring, including any additional collateral or guarantees.
- Insignificant delays in cash flows are a factor to consider when
determining whether a concession has been granted, and that some additional
implementation guidance should be added in the final Update to assist
creditors in applying the guidance. The proposed Update indicated that such
delays may be troubled debt restructurings, which led some respondents to
believe that most or all delays would be considered troubled debt
restructurings. The Board asked the staff to present specific examples to be
included in the implementation guidance at a future meeting.
- For purposes of determining whether a borrower is experiencing financial
difficulty, creditors should consider whether default is “probable in the
- For public entities, the clarifications apply to all restructurings that
occur on or after January 1, 2011. For nonpublic entities, the clarifications
apply to all restructurings that occur on or after January 1, 2012.
- For public entities, disclosures about troubled debt restructurings are
effective for interim periods ending on or after June 15, 2011, and for annual
periods beginning on or after December 15, 2010, consistent with the
requirements of Accounting Standards Update No. 2010-20, Receivables
(Topic 310): Disclosures about the Credit Quality of Financing Receivables and
the Allowance for Credit Losses. There will be no requirement to disclose
troubled debt restructuring activity in interim periods on an annual
- For nonpublic entities, the disclosures are effective for annual reporting
periods ending on or after December 15, 2012.
The Board instructed
the staff to perform outreach with users of financial statements and regulators
of financial institutions to assess whether the proposed transition guidance is
useful and appropriate. The results of this outreach will be presented in the
- Creditors should be precluded from using the borrower’s effective rate
test in paragraph 470-60-55-10 to assess whether a restructuring is
- Additional guidance on removing troubled debt restructurings from the
related disclosures is not necessary. The Board also decided that it will
consider troubled debt restructurings more comprehensively as part of the
project on accounting for financial instruments.
impairment assessments. The Board met to discuss initial outreach
and research regarding the implications of alternative approaches to assessing
goodwill for impairment. The Board deliberated potential improvements to reduce
the cost incurred by nonpublic entities in assessing goodwill for impairment.
The Board did not reach any decisions at this meeting and will resume
deliberations during next week’s Board meeting.