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 Meeting

Insurance 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.

Troubled 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:
  1. 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.
  2. 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.
  3. For purposes of determining whether a borrower is experiencing financial difficulty, creditors should consider whether default is “probable in the foreseeable future.”
  4. 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.
  5. 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 basis.
  6. For nonpublic entities, the disclosures are effective for annual reporting periods ending on or after December 15, 2012.
The Board also affirmed its decisions that:
  1. Creditors should be precluded from using the borrower’s effective rate test in paragraph 470-60-55-10 to assess whether a restructuring is troubled.
  2. 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.
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 next meeting.

Goodwill 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.