Action Alert No. 02-29
July 31, 2002

NOTICE OF MEETINGS

OPEN MEETING OF THE FINANCIAL ACCOUNTING STANDARDS BOARD

Wednesday, August 7, 2002, 9:00 a.m.

The Board meeting will start at 9:00 a.m. instead of 9:30 a.m.

  1. Business combinations: acquisitions of certain financial institutions. The Board will discuss the comments received on and redeliberate the provisions of the FASB Exposure Draft, Acquisitions of Certain Financial Institutions. If the Board reaches decisions on all of the issues, the staff plans to ask the Board for permission to begin drafting the final  Statement. (Estimated 60-minute discussion.)    

     

  2. Guarantor’s accounting and disclosure requirements for guarantees. The Board will discuss the comments received on the Exposure Draft of a proposed FASB Interpretation, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and begin its redeliberation of the issues.  (Estimated 90-minute discussion.)   

     

  3. Financial instruments: liabilities and equity. The Board will discuss (a) the application of the ownership relationship notion contained in the revised definition of liabilities and (b) the initial and subsequent measurement of derivative financial instruments classified as liabilities that require or permit as their only settlement alternative delivery of cash or other financial assets in exchange for a fixed number of shares. The Board also will discuss what is meant by the definition of mandatorily redeemable. (Estimated 90-minute  discussion.)   

     

  4. Agenda decision: Statement 123 transition. In response to inquiries from constituents, the Board will consider whether to undertake a fast-track, limited-scope project to reconsider the transition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation. Under those transition provisions, entities that decide to change to the preferred method of accounting for stock-based compensation (the method that recognizes the fair value of stock-based compensation arrangements with employees as an expense in determining earnings) are required to adopt that change prospectively. If the Board decides to undertake such a project, it also will discuss possible alternatives to the transition provisions in Statement 123.  (Estimated 60-minute discussion.)   

     

  5. 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.

     

REVISED 8/7/02— The Board will not continue its discussions from the August 7, 2002 Board meeting on Thursday, August 8, 2002.

Thursday, August 8, 2002, 1:00 p.m.

If necessary, the Board may continue its discussions from the August 7, 2002 Board meeting. Any possible meeting on August 8 will be announced through the Action Alert email notification service and posted to the FASB website as soon as that decision is reached and not later than 5:00 p.m., Wednesday, August 7. Otherwise, the next scheduled Board meeting will be held on Wednesday, August 14.

OPEN MEETING WITH REPRESENTATIVES OF THE FINANCIAL MANAGERS SOCIETY

Friday, August 2, 2002, 10:30 a.m.

The Board will meet with representatives of the Financial Institutions Accounting Committee of the Financial Managers Society to discuss matters of mutual interest.

AcSEC CLEARANCE

July 17, 2002 Board Meeting

AcSEC document. The Board met with representatives of the AICPA’s Accounting Standards Executive Committee (AcSEC) and discussed clearance of a Prospectus for a project on valuation of privately-held-company equity securities issued in other than a business combination. The Board did not clear the Prospectus and recommended that any valuation guidance be provided as an AICPA Practice Aid.

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 hearings, and through other communication channels. Decisions become final only after a formal written ballot to issue a final Statement or Interpretation.

July 24, 2002 Board Meeting

Financial performance reporting by business enterprises. The Board continued its discussion of a similar project conducted by the International Accounting Standards Board (IASB) and the UK’s Accounting Standards Board (ASB). An IASB staff member discussed the project with the Board, focusing on the underlying principles of the project and the tentative decisions made by the IASB and ASB to date. While the meeting was informational, and no decisions were made, the Board expressed support for the approach taken by the IASB and ASB.

Business combinations: purchase method procedures. The Board discussed issues related to applying the fair value measurement hierarchy for initial measurement of assets acquired and liabilities assumed in a business combination. (The fair value measurement hierarchy was approved by the Board at the June 19, 2002 meeting.) The Board reached the following decisions:

  • The project scope would exclude issues related to the recognition and measurement of (1) income taxes (FASB Statement No. 109, Accounting for Income Taxes) and (2) benefit plan obligations (FASB Statements No. 87, Employers’ Accounting for Pensions; No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions; and No. 112, Employers’ Accounting for Postemployment Benefits.) Therefore, the fair value hierarchy would not apply to those items.

     

  • Additional guidance would be provided for use when applying Level 2 of the hierarchy (an observable market transaction is not available) to certain assets and liabilities, as follows:

     

    1. Items of inventory would be measured by using a market-based assumption model that would incorporate an observable disposition price and market-based calculations of estimated costs to complete, including an estimated profit margin and costs to sell the item.

       

    2. For items for which an observable market price does not exist for the asset in its current condition (such as used tangible long-lived assets), fair value would be estimated using other measurement techniques (such as present value techniques) that incorporate market-based assumptions.

       

  • The fair value of a liability assumed should reflect the credit rating attaching to the liability as a result of the combination.

     

  • Acquired receivables (including loans) would be measured at fair value at the date of acquisition; therefore, a separate allowance for uncollectible amounts would not be established upon initial recognition of those receivables.

     

  • Acquired long-lived assets would initially be measured at fair value even if the acquirer intends to dispose of the acquired long-lived assets subsequent to the acquisition. Therefore, the measurement guidance for assets held for sale (fair value less cost to sell) in FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, would not apply on initial recognition of those assets. However, the Board asked the staff to clarify the initial measurement of acquired assets if their subsequent disposition is a condition of the business combination (such as a condition imposed by a regulator).

     

  • Guidance in EITF Issue No. 02-7, "Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets," should be used for purposes of determining the unit of accounting for acquired intangible assets at the date of initial recognition.

     

NOTICE OF FASB OPEN ROUNDTABLE DISCUSSION ON
CERTAIN SPECIAL-PURPOSE ENTITIES

On September 30, 2002, the FASB will hold a public roundtable discussion to obtain information from and views of interested individuals and organizations about its June 28, 2002 Exposure Draft of a proposed Interpretation, Consolidation of Certain Special-Purpose Entities. An individual or organization desiring to participate must notify the FASB by sending an email to director@fasb.org by August 15, 2002, and submit a position paper or a comment letter addressing the provisions of the proposed Interpretation by August 30, 2002. Depending on the response, the Board may not be able to accommodate all requests to participate in the roundtable discussion. However, all submissions by those requesting to participate in the roundtable discussion will be available at the roundtable discussion for review.

Minutes of the roundtable discussion and copies of all written submissions on this project will be available for review in the FASB’s Public Reference Room. Copies are available for a duplication fee.

FASB DOCUMENT AVAILABLE

Copies of FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities, are available by placing an order on-line or from the FASB Order Department by calling 1-800-748-0659.

FUTURE OPEN MEETINGS

The following is a list of open meetings tentatively scheduled through September. Because schedules may change, please check the FASB calendar of meetings on this website before finalizing your plans. Revisions to this list since the last issue of Action Alert are highlighted in bold.

Wednesday, August 14, 2002—FASB Board Meeting

Wednesday, August 21, 2002—No FASB Board Meeting

Wednesday, August 28, 2002—FASB Board Meeting

Thursday, August 29, 2002—Liaison Meeting with the New York Society of Security Analysts

Wednesday, September 4, 2002—FASB Board Meeting

Friday, September 6, 2002—Liaison Meeting with the Institute of Management Accountants

Wednesday, September 11, 2002—FASB Board Meeting

Wednesday, September 11, 2002—Emerging Issues Task Force Meeting

Thursday, September 12, 2002—Emerging Issues Task Force Meeting

Wednesday, September 18, 2002—FASB/IASB Joint Board Meeting

Thursday, September 19, 2002—Liaison Meeting with the American Council of Life Insurance

Tuesday, September 24, 2002—Financial Accounting Standards Advisory Council Meeting

Wednesday, September 25, 2002—FASB Board Meeting

Thursday, September 26, 2002—Liaison Meeting with the American Gas Association

Monday, September 30, 2002—FASB Open Roundtable Discussion on Certain Special-Purpose Entities


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