Action Alert No. 08-03 January 17, 2008

FASB: Action Alert No. 08-03

Revised 01/18/08—See below

Action Alert No. 08-03
January 17, 2008

NOTICE OF MEETINGS

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

[Revised 01/18/08] Wednesday, January 23, 2008, 8:00 a.m.

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

  1. Earnings per share (estimated 60-minute discussion). The Board will discuss issues that have arisen in drafting the revised Exposure Draft on the proposed amendments to FASB Statement No. 128, Earnings per Share, as part of its international convergence efforts.

  2. Accounting for trading inventory (estimated 30-minute discussion). The Board will discuss issues related to accounting for trading inventory and whether to issue a proposed FSP that would amend Accounting Research Bulletin No. 43, Restatement and Revision of Accounting Research Bulletins, to require fair value accounting for trading inventory.

  3. [Revised 01/18/08—This topic added to agenda.] Deferral of the effective date of Interpretation 48 for nonpublic entities (estimated 30-minute discussion). The Board will discuss issues raised by respondents to proposed FSP FIN 48-b, Effective Date of FASB Interpretation No. 48 for Nonpublic Enterprises. The Board also will discuss whether to issue that proposed FSP as final.

  4. 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, January 23, 2008, following the Board meeting

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at a future Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.

OPEN MEETING WITH REPRESENTATIVES OF THE NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS

Friday, January 25, 2008, 10:30 a.m.

The Board will meet with representatives of the National Association of Real Estate Investment Trusts to discuss matters of mutual interest.

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 roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue a final Statement, Interpretation, FSP, or Statement 133 Implementation Issue.

January 9, 2008 Board Meeting

Financial guarantee insurance. The Board continued redeliberations of the FASB Exposure Draft, Accounting for Financial Guarantee Insurance Contracts. The Board discussed issues about the recognition and measurement of the premium receivable (asset) and the unearned premium revenue (liability) for installment premium insurance contracts. The Board decided that:

  1. An insurance enterprise should recognize an asset for the premium receivable and a liability for the unearned premium revenue at inception of a financial guarantee insurance contract when premiums are received in installments.

  2. An enterprise can use prepayment assumptions to determine an expected term of a financial guarantee insurance contract when there is a large number of similar assets underlying an insured obligation and the prepayments are probable and can be reliably estimated. Adjustments for subsequent changes in those prepayment assumptions would be on a prospective basis. In all other instances, contractual terms would be used.

  3. The discount rate to be used to measure the premium receivable (asset) and the unearned premium revenue (liability) is the risk-free rate. The risk-free rate is updated only for a change in estimate.

  4. Prescriptive guidance on the display of the accretion of the premium receivable (asset) in the income statement will not be provided. The Board will address disclosure requirements about the accretion of the premium receivable (asset) through the income statement at a future meeting.

Not-for-profit endowments and UPMIFA. The Board made the following decisions on a proposed FSP on not-for-profit endowments and the Model Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA):

  1. The Board decided to require five new additional disclosures in the proposed FSP:

    Disclosure A: Net Asset Composition by Type of Endowment Fund
    Each period for which a statement of financial position (balance sheet) is presented, an organization should present the composition of its endowment by net asset class, in total and by type of endowment fund, showing donor-restricted endowment funds separately from funds designated by the organization to function as endowment (that is, be invested long term). The organization should also indicate the cumulative amount of investment return, if any, contained in the permanently restricted net asset class because of the organization’s interpretation of relevant law, beyond the amount required by any explicit donor stipulations.

    Disclosure B: Endowment Roll Forward
    Each period for which a statement of activities is presented, an organization should present a reconciliation of the beginning and ending balance of its endowment, in total and by net asset class, including, at a minimum, the following line items (as applicable): investment return, separated into investment income (interest, dividends, rents) and net appreciation or depreciation of investments; contributions; distribution of endowment return to other funds (spending); reclassifications; and other changes (specified as necessary). The organization should also indicate how much, if any, of the additions of investment return to permanently restricted net assets are the result of the organization’s interpretation of relevant law, as opposed to explicit donor stipulations.

    Disclosure C: Endowment Spending Policy(ies)
    The organization should describe its policy(ies) on the appropriation of endowment assets for spending (its endowment spending policy).

    Disclosure D: Planned Endowment Distributions
    The organization should indicate its planned distribution of endowment return to other funds (spending) for the next year, if known.

    Disclosure E: Endowment Investment Policies and Strategies
    The organization should describe its endowment investment policy(ies). Such a description should include, at a minimum:

    1. The organization’s return objectives and risk parameters

    2. How those objectives relate to the organization’s endowment spending policy(ies)

    3. The strategies employed for achieving those objectives.

  2. The proposed FSP would be effective for fiscal years ending after June 15, 2008, with early adoption permitted as long as an organization has not already issued its financial statements.

  3. For the FSP’s UPMIFA-specific accounting provisions, the cumulative effect of any reclassifications between net asset classes would be made as of the beginning of the period in which UPMIFA becomes effective for the organization.

  4. The proposed FSP will have approximately a 60-day comment period.

The Board authorized the staff to proceed to a draft of a proposed FSP for vote by written ballot.

FUTURE OPEN MEETINGS

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, January 30, 2008—FASB Board Meeting
Wednesday, January 30, 2008—FASB Education Session
Wednesday, February 6, 2008—FASB Board Meeting
Wednesday, February 6, 2008—FASB Education Session
Wednesday, February 13, 2008—FASB Board Meeting
Wednesday, February 13, 2008—FASB Education Session
Wednesday, February 20, 2008—FASB Board Meeting
Wednesday, February 20, 2008—FASB Education Session
Wednesday, February 27, 2008—FASB Board Meeting
Wednesday, February 27, 2008—FASB Education Session
Wednesday, March 5, 2008—FASB Board Meeting
Wednesday, March 5, 2008—FASB Education Session
Wednesday, March 12, 2008—FASB Board Meeting
Wednesday, March 12, 2008—Emerging Issues Task Force Meeting
Tuesday, March 18, 2008—Financial Accounting Standards Advisory Council Meeting
Wednesday, March 19, 2008—FASB Board Meeting
Wednesday, March 19, 2008—FASB Education Session
Wednesday, March 26, 2008—FASB Board Meeting
Wednesday, March 26, 2008—FASB Education Session