FASB: Action Alert No. 06-04

Action Alert No. 06-04
January 26, 2006

NOTICE OF MEETINGS

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

Wednesday, February 1, 2006, 9:00 a.m.

  1. Entrance fee deposits and deferred revenue (estimated 1-hour discussion). The Board will consider the applicability of FASB Statement No. 78, Classification of Obligations That Are Callable by the Creditor, for the classification of refundable entrance fees in the continuing care retirement community industry.

  2. Statement 123(R)/Liability classification (estimated 30-minute discussion). The Board will consider comments received from respondents to the proposed FSP FAS 123(R)-d, "Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event," and whether to proceed to a final FSP.

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

OPEN MEETING WITH REPRESENTATIVES OF THE AMERICAN BAR ASSOCIATION

Monday, January 30, 2006, 10:45 a.m.

The Board will meet with representatives of the Accounting Standards Subcommittee of the Committee on Law and Accounting of the American Bar Association 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, or FSP.

January 18, 2006 Board Meeting

Postretirement benefit obligations including pensions. The Board discussed issues relating to the limited-scope, first phase of its project to reconsider the accounting for postretirement benefits including pensions.  The Board decided:

  1. The disclosure requirements of FASB Statement No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, would be revised as follows:

    1. The existing requirement to disclose a reconciliation of the over- or underfunded status to amounts recognized in the statement of financial position would be eliminated (paragraph 5(c) of Statement 132(R)).

    2. The existing requirement to disclose information about a recognized additional minimum liability would be replaced with a requirement to disclose the nature and amount of changes in plan assets and benefit obligations recognized in net income and in other comprehensive income of each period (paragraph 5(i) of Statement 132(R)).

    3. Disclosure would be required in the postretirement benefits footnote of the accumulated amount of changes in plan assets and benefit obligations that have been recognized in other comprehensive income and will be recycled into net income in future periods.

    4. The examples in Statement 132(R) would be amended to clarify and illustrate the existing requirement to disclose the current and noncurrent portion of postretirement benefit plan assets and liabilities.

    5. The current requirement to disclose the measurement date (if other than the reporting date) would be eliminated when the measurement date change is effective (paragraphs 5(k) and 8(j) of Statement 132(R)).

    6. Disclosure would be required of the amount of estimated net actuarial gains and losses and prior service costs that will be amortized from accumulated comprehensive income into net income over the next fiscal year.

  2. FASB Statements No. 87, Employers' Accounting for Pensions, and No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, would be amended to incorporate existing guidance on the selection of the discount rate that currently resides in other literature (such as the basis for conclusions in Statement 106).

  3. Except as noted in item 4 below, an entity would be required to adopt the proposed changes in its first fiscal year ending after December 15, 2006.  The entity would initially apply the requirements through retrospective application to all prior periods presented, unless it concludes it is not practicable to estimate the amount of a deferred tax valuation allowance that would be required in those prior periods.  The Board directed the staff to provide several examples of the initial application in the Exposure Draft of the proposed Statement.

  4. An entity that currently measures plan assets and obligations as of a date earlier than the date of its financial statements would be required to change to a fiscal-year-end measurement date in fiscal years beginning after December 15, 2006.  That entity would be required to adjust the opening balance of retained earnings for changes in plan assets and benefit obligations (that is, the funded status) and changes that would be recognized in other comprehensive income between the previous measurement date and the beginning of 2007.  Curtailment and settlement gains and losses would be recognized as a component of net benefit cost in the quarter in which they occur.

  5. The comment period for the Exposure Draft would be 60 days.  The Board expects to issue that Exposure Draft in March.

Leveraged leases. The Board discussed several issues raised in the comment letters received 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,” specifically:

  1. The threshold for recognizing tax benefits in a leveraged lease transaction

  2. The requirement that an entity reclassify the lease from leveraged lease accounting if, as a result of the most recent recalculation, the lease no longer qualifies as a leveraged lease

  3. Whether interest and penalties should be included in the recalculation of a leveraged lease.

The Board decided that:

  1. An entity’s accounting policy for the recognition of tax benefits in a leveraged lease should be consistent with its accounting policy for the recognition of tax benefits required in the Board’s current uncertain tax positions project.

  2. An entity should not reclassify a lease that does not meet the characteristics for leveraged lease accounting based on the most recent recalculation.

  3. An entity should update all assumptions based on the most current information when performing a recalculation of a leveraged lease transaction.

  4. An entity should not include interest and penalties in the recalculation of a leveraged lease transaction.

FASB DOCUMENT AVAILABLE

FASB Exposure Draft, The Fair Value Option for Financial Assets and Financial Liabilities, was issued and posted to the FASB website on January 25, 2006. Comments are requested by April 10, 2006.

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, February 8, 2006—FASB Board Meeting
Wednesday, February 8, 2006—FASB Education Session
Wednesday, February 15, 2006—FASB Board Meeting
Wednesday, February 15, 2006—FASB Education Session
Wednesday, February 22, 2006—FASB Board Meeting
Wednesday, February 22, 2006—FASB Education Session
Wednesday, March 1, 2006—FASB Board Meeting
Wednesday, March 1, 2006—FASB Education Session
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—p.m., Emerging Issues Task Force Meeting
Thursday, March 16, 2006—Emerging Issues Task Force Meeting
Friday, March 17, 2006—FASB Education Session
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

Additional Details