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 a final standard.

August 19, 2009 Board Meeting

Accounting for financial instruments. The Board discussed which financial instruments would be affected by the proposed changes to the accounting for financial instruments.

The Board decided that the scope of the project would include all financial instruments as defined in the Master Glossary of the FASB Accounting Standards Codification™, except for the following:

  1. Employers’ and plans’ obligations for pension benefits; other postretirement benefits, including health care and life insurance benefits, postemployment benefits, and employee stock option and stock purchase plans; and other forms of deferred compensation arrangements as defined in the following:

    1. U.S. GAAP on compensation (originally issued as FASB Statement No. 43, Accounting for Compensated Absences, and APB Opinion No. 12, Omnibus Opinion—1967)

    2. Topic 712 on nonretirement postemployment benefits (originally issued as FASB Statement No. 112, Employers’ Accounting for Postemployment Benefits)

    3. Topic 715 on compensation for retirement benefits (originally issued as FASB Statements No. 87, Employers’ Accounting for Pensions, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions)

    4. Topic 960 on plan accounting for defined benefit pension plans (originally issued as FASB Statement No. 35, Accounting and Reporting by Defined Benefit Pension Plans)

    5. U.S. GAAP on shared-based payment (originally issued as FASB Statement No. 123 (revised 2004), Share-Based Payment).

  2. Contracts within the scope of Topic 944 on insurance (originally issued as FASB Statements No. 60, Accounting and Reporting by Insurance Enterprises, No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts , and No. 163, Accounting for Financial Guarantee Insurance Contracts), except for deposit-type (investment) contracts issued by insurance entities as defined in that Topic.

  3. Noncontrolling interests in consolidated subsidiaries.

  4. Equity investments in consolidated subsidiaries.

  5. Equity instruments issued by the entity and classified in stockholders’ equity, in their entirety, in the statement of financial position. Financial instruments with equity-like features that are classified as liabilities under U.S. GAAP would be subject to the Board’s proposal. The scope also would not apply to equity components of hybrid financial instruments that require bifurcation.

  6. An interest in a variable interest entity that the entity is required to consolidate.

  7. Lease assets and liabilities that are accounted for under Topic 840 on leases (originally issued as FASB Statement No.13, Accounting for Leases).


The Board also decided to include an anti-abuse provision within the final guidance that would require the use of judgment to identify nonsubstantive contractual clauses or multiple transactions entered into to circumvent provisions of specific accounting standards, specifically the identification of financial instruments.

Revenue recognition. The Discussion Paper, Preliminary Views on Revenue Recognition in Contracts with Customers, proposes that revenue recognition should be based on a single asset or liability—an entity’s contract with a customer. The combination of the remaining rights and obligations in that contract gives rise to a (net) contract asset or a (net) contract liability.

At this meeting, the Board discussed various issues related to the presentation of contracts with customers. Those issues include:

  1. When, if ever, an entity should present contractual rights and obligations as assets and liabilities, respectively
  2. Whether an entity should present net contract assets separately from net contract liabilities
  3. Whether and how an entity should present short-term contracts separately from long-term contracts
  4. The relationship between an entity’s contract position and accounts receivable.
The Board did not reach any decisions and asked the staff to further analyze these issues for a future meeting.

Disclosure of certain loss contingencies. The Board began redeliberations of disclosure requirements for certain loss contingencies. The Board decided to initially focus its deliberations on loss contingencies associated with litigation and to consider other types of loss contingencies at a future meeting.

The Board decided on the following disclosure objective:

    An entity shall disclose qualitative and quantitative information about the loss contingency to enable a financial statement user to understand the nature of the contingency and its potential timing and magnitude.

The Board decided on the following broad principles for disclosures about loss contingencies:

  1. Disclosures about litigation contingencies should focus on the contentions of the parties, rather than predictions about the future outcome.

  2. Disclosures about a contingency should be more robust as the likelihood and magnitude of loss increase and as the contingency progresses toward resolution.

  3. Disclosures should provide a summary of information that is publicly available about a case and indicate where users can obtain more information.


The Board decided to maintain the existing requirement to disclose asserted claims and assessments whose likelihood of loss is at least reasonably possible and to clarify that at least reasonably possible and more than remote have the same meaning. The Board also decided that certain remote loss contingencies should be disclosed, and it directed the staff to develop possible approaches for discussion at a future meeting. The Board also decided to maintain existing threshold requirements for unasserted claims and assessments and agreed to enhance the existing interpretive guidance about the threshold.

The Board decided that entities should not consider the possibility of recoveries from insurance or indemnification arrangements when assessing whether a contingency should be disclosed.

Regarding quantitative disclosure requirements, the Board directed the staff to develop an approach that would focus on disclosure of nonprivileged quantitative information that would be relevant to making an estimate of the potential loss, for consideration by the Board at a future meeting.

The Board decided not to require entities to disclose information about settlement negotiations.

The Board decided to require disclosure about possible recoveries from insurance and other sources if and to the extent that the information has been provided to the plaintiff in discovery.

The Board discussed the effective date of any final guidance on this project and decided not to rule out the possibility that it could be effective for fiscal years ending after December 15, 2009.

Technical corrections to FASB Statements and other U.S. GAAP literature. The Board discussed the comments received on the FASB Exposure Draft, Rescission of FASB Technical Bulletin No. 01-1, Nullification of EITF Topics No. D-33 and No. D-67, Amendments, and Technical Corrections, and decided to proceed to issuing a final Accounting Standards Update (Update).

The final Update will reflect the proposed amendments in the Exposure Draft, with a few modifications. The significant modifications include the following:

  1. FASB Technical Bulletin No. 01-01, Effective Date for Certain Financial Institutions of Certain Provisions of Statement 140 Related to the Isolation of Transferred Financial Assets, will not be rescinded in its entirety. Rather, the definition of the phrase equitable right of redemption in footnote 1 will survive as a definition in the Master Glossary of the FASB Accounting Standards CodificationTM.
  2. The term only will be added before the term underlying in the first sentence of paragraph 13 (paragraph 815-15-25-26 of the Accounting Standards Codification) of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (now included in Topic 815 of the Accounting Standards Codification). Special effective date and transition provisions will be specified.
  3. A clarification to Step 3 of Statement 133 Implementation Issue No. B16, “Calls and Puts in Debt Instruments,” (now included in Subtopic 815-15) has been added.

The final Update will be effective upon issuance with the exception of the amendment to Statement 133 (Topic 815) discussed above and the nullification of EITF Topic No. D-33, “Timing of Recognition of Tax Benefits for Pre-reorganization Temporary Differences and Carryforwards.”