FASB: Action Alert No. 08-31

Action Alert No. 08-31
July 31, 2008

NOTICE OF MEETINGS

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

Wednesday, August 6, 2008, 9:00 a.m.

  1. Disclosures about credit derivatives (estimated 1-hour discussion). The Board will begin redeliberations and discuss comments received on proposed FSP FAS 133-b and FIN 45-c, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45. Specifically, the Board will discuss issues related to scope, disclosures, and effective date.

  2. 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, August 6, 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.

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.

July 23, 2008 Board Meeting

Leases. The Board decided to defer development of a new accounting model for lessors for coordination with related projects such as revenue recognition; the current project will address only the development of a high-quality standard of accounting for lessees. The Board also agreed with an overall approach under which lessees would generally apply the finance lease model in International Accounting Standard (IAS) 17, Leases, to all leases, adapted where necessary.

The Board decided to include options to extend or terminate a lease in the measurement of a right-of-use asset and a lease obligation based on the best estimate of the expected lease term. The Board also agreed that contractual factors, noncontractual factors, and business factors should be considered when determining the lease term.

The Board decided to require lessees to include contingent rentals in the measurement of the right-of-use asset and the lease obligation based on their best estimate of expected lease payments.

The Board decided that both the right-of-use asset and the lease obligation should be initially measured at the present value of the best estimate of expected lease payments for all leases. The Board also decided to require the best estimate of expected lease payments to be discounted using the lessee’s secured incremental borrowing rate.

The Board discussed the subsequent measurement of both the right-of-use asset and the lease obligation but did not reach a decision. The Board also discussed whether there should be criteria to distinguish between leases that are in-substance purchases and leases that are rights to use an asset but did not reach a decision.

Reporting discontinued operations. The Board decided to amend the proposed definition of discontinued operations to include acquired businesses (as defined in FASB Statement No. 141 (revised 2007), Business Combinations) that meet the criteria to be classified as held for sale on the acquisition date. In addition, the Board decided not to include an additional criterion that would limit businesses meeting the criteria to be classified as held for sale on acquisition to be reported in discontinued operations only when the sale is required by law or regulation.

The Board decided that the following discontinued operation disclosures and business combination disclosures would not be required for businesses that meet the criteria to be classified as held for sale on acquisition:

For discontinued operation disclosures:

  1. The gain or loss recognized for any initial or subsequent write-down to fair value less cost to sell (FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, paragraph 47(b)).

  2. The amount of pretax profit or loss reported in discontinued operations (Statement 144, paragraph 47(c)).

  3. Major classes of assets and liabilities of a disposal group (Statement 144, paragraph 47(a)).

  4. Major classes of income and expenses, including impairments, interest, depreciation, and amortization (a new requirement).

  5. If applicable, net income attributable to the parent (controlling interest) (a new requirement).

  6. Major classes of cash flows (operating, investing, and financing) (a new requirement).

For business combination disclosures:

  1. For acquired receivables not subject to requirements of AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer:

    1. The fair value of the receivables

    2. The gross contractual amounts receivable

    3. The best estimate at the acquisition date of the contractual cash flows not expected to be collected.

    The disclosure should be provided by major class of receivable, such as loans, direct finance leases in accordance with FASB Statement No. 13, Accounting for Leases, and any other class of receivables (Statement 141(R), paragraph 68(h)).

  2. The amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed (Statement 141(R), paragraphs 68(i) and A107).

  3. If the acquirer is a public business enterprise, as described in paragraph 9 of FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information:

    1. The amounts of revenues and earnings of the acquiree since the acquisition date included in the consolidated income statement for the reporting period

    2. The revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period (supplemental pro forma information)

    3. If comparative financial statements are presented, the revenue and earnings of the combined entity for the comparable prior reporting period as though the acquisition date for all business combinations that occurred during the year had occurred as of the beginning of the comparable prior annual reporting period (supplemental pro forma information) (Statement 141(R), paragraph 68(r)).

The Board decided that if an entity presents the major classes of assets and liabilities classified as held for sale and/or major classes of income and expense of discontinued operations in the notes to the financial statements, the entity should reconcile those note disclosures to the amounts presented on the face of the financial statements.

The Board decided that a proposed FSP to be issued on this project would not provide explicit guidance as to whether the proposed disclosures should be provided separately for each component of an entity and each noncurrent asset (disposal group) that either has been disposed of or is classified as held for sale. Also, the Board decided that the proposed FSP would not include a question in the notice to recipients on whether the disclosures should be provided separately for each component and each noncurrent asset (disposal group) that either has been disposed of or is classified as held for sale.

The Board decided that the use of proceeds from disposal activities would be excluded from the disclosure requirements. In addition, the Board supported including clarifying language in the proposed FSP that an entity should determine whether the component of an entity meets the definition of an operating segment regardless of whether it is required to apply Statement 131.

The Board directed 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 September. 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, August 13, 2008—FASB Board Meeting
Wednesday, August 13, 2008—FASB Education Session
Wednesday, August 27, 2008—FASB Board Meeting
Wednesday, August 27, 2008—FASB Education Session
Wednesday, September 3, 2008—FASB Board Meeting
Wednesday, September 3, 2008—FASB Education Session
Monday, September 8, 2008—Liabilities and Equity Roundtable Meeting
Wednesday, September 10, 2008—FASB Board Meeting
Wednesday, September 10, 2008—Emerging Issues Task Force Meeting
Monday, September 15, 2008—Liaison Meeting with the AICPA Private Companies Practice Section, Technical Issues Committee
Wednesday, September 17, 2008—FASB Education Session
Thursday, September 18, 2008—FASB Board Meeting
Monday, September 22, 2008—Financial Accounting Standards Advisory Council Meeting
Tuesday, September 23, 2008—Financial Accounting Standards Advisory Council Meeting
Wednesday, September 24, 2008—FASB Board Meeting
Wednesday, September 24, 2008—FASB Education Session
Wednesday, September 24, 2008—Contingency Disclosures Roundtable, p.m.


Additional Details