SUMMARY OF BOARD DECISIONS

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 an Accounting Standards Update.

April 14, 2010 FASB Board Meeting

SEC staff announcement. The EITF Chair announced on behalf of the SEC Deputy Chief Accountant in Charge of Accounting Group the SEC’s release of an SEC Staff Announcement, Accounting for the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act, which states the following:

On March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010, which is a reconciliation bill that amends the Patient Protection and Affordable Care Act that was signed by the President on March 23, 2010 (collectively the "Acts").

Recently, questions have arisen about the effect, if any, that the different signing dates might have on the accounting for these two Acts. This timing difference, related solely to the signing dates, should not have an impact on a majority of registrants because the Acts were both signed within a relatively short time period, which for the vast majority of companies falls into the same reporting period. However, there may be a limited number of registrants with a period end that falls between the signing dates for which the timing difference could raise questions about whether the different signing dates have an accounting impact. For example, Topic 740, Income Taxes, of the FASB Accounting Standards Codification™ requires the measurement of current and deferred tax liabilities and assets to be based on provisions of enacted tax law; the effects of future changes in tax laws or rates are not anticipated.

After consultation with the FASB staff, the Office of the Chief Accountant would not object to a view that the two Acts should be considered together for accounting purposes. That is, in this specific fact pattern the SEC staff would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation Act of 2010 when accounting for the Patient Protection and Affordable Care Act. This view is based in part on the SEC staff's understanding that the two Acts, when taken together, represent the current health care reforms as passed by Congress and signed by the President. The SEC staff does not believe that it would be appropriate to analogize to this view in any other fact patterns.

This staff announcement will be incorporated into the FASB Codification.


Disclosure about certain loss contingencies. The Board continued its redeliberations of the project. The following summary of decisions reached at today’s meeting also incorporates and updates the tentative decisions reached at the August 19, 2009 meeting.
  1. Disclosure Objective


  2. An entity shall disclose qualitative and quantitative information about loss contingencies to enable financial statement users to understand their nature, potential timing, and potential magnitude.

  3. Disclosure Principles


  4. To achieve the above objective, an entity shall consider the following principles in determining disclosures that are appropriate for its individual facts and circumstances:

    1. During early stages of a contingency’s life cycle, an entity shall disclose information (even though its availability may be limited) to help users understand the nature and potential magnitude of a loss contingency. In subsequent reporting periods, disclosure shall be more extensive as additional information becomes available.
    2. An entity may aggregate disclosures about similar contingencies (for example, by class or type) so that the disclosures are understandable and not too detailed. If an entity provides disclosures on an aggregated basis, it shall disclose the basis for aggregation.
       
  5. Disclosure Threshold


  6. The Board decided to maintain the existing requirement to disclose asserted claims and assessments whose likelihood of loss is at least reasonably possible.

    The Board also decided that disclosure of certain remote loss contingencies, due to their nature, potential timing, or potential magnitude, may be necessary to inform users about the entity’s vulnerability to a potential severe impact. An entity will need to exercise judgment in assessing its specific facts and circumstances to determine whether disclosure about remote contingencies is necessary. Factors that an entity may consider in making this determination include any of the following:

    1. The potential effect on the entity’s operations
    2. The cost to the entity for defending its contentions
    3. The amount of efforts and resources management may have to devote to resolve the contingency.

    The plaintiff’s amount of damages claimed, by itself, does not necessarily determine whether disclosure about a remote contingency is necessary although it could be one of the factors to be considered in this determination.

    When assessing the materiality of loss contingencies to determine whether disclosure is required, the entity shall not consider the possibility of recoveries from insurance or other indemnification arrangements.

  7. Qualitative Disclosures


  8. For all contingencies that meet the disclosure threshold, disclose the following:

    1. Qualitative information to enable users to understand the nature and risks of a contingency or group of contingencies.
    2. During early stages of asserted litigation contingencies, disclosure shall include, at a minimum, the contentions of the parties (for example, the basis for the claim and the amount of damages claimed by the plaintiff and the basis for the entity’s defense or a statement that the entity has not yet formulated its defense). In subsequent reporting periods, disclosure shall be more extensive as additional information becomes available, for example, as the litigation progresses toward resolution and/or if the likelihood and magnitude of loss increase. Furthermore, if practicable, an entity shall disclose the anticipated timing of, or the next steps in, the resolution of individually material asserted litigation contingencies.
    3. For individually material contingencies, the disclosure shall be sufficiently detailed to enable financial statement users to obtain additional information from publicly available sources such as court records. For example, an entity shall disclose the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the proceeding, and its current status.
    4. When disclosure is provided on an aggregated basis, an entity shall disclose the basis for aggregation and information that would enable financial statement users to understand the nature, potential timing, and potential magnitude of loss.
       
  9. Quantitative Disclosures


  10. For all contingencies that are at least reasonably possible, disclose the following:

    1. Publicly available quantitative information, for example, in case of litigation contingencies, the amount claimed by the plaintiff or the amount of damages indicated by the testimony of expert witnesses
    2. An estimate of the possible loss or range of loss and the amount accrued, if any
    3. If the possible loss or range of loss cannot be estimated, a statement that an estimate cannot be made and the reason(s) therefor
    4. Other nonprivileged information that would be relevant to financial statement users to enable them to understand and/or assess the possible loss
    5. Information about possible recoveries from insurance and other sources only if, and to the extent that it has been provided to the plaintiff(s) in a litigation contingency, it is discoverable either by the plaintiff or by a regulatory agency, or it relates to a recognized receivable for such recoveries. If the insurance company has either denied or contested the entity’s claim for recovery, the entity shall disclose that fact.

    For those remote contingencies that meet the disclosure threshold, disclose the following:

    1. Publicly available quantitative information, for example, in case of litigation contingencies, the amount claimed by the plaintiff or the amount of damages indicated by the testimony of expert witnesses
    2. Other nonprivileged information that would be relevant to financial statement users to enable them to understand and/or assess the contingency’s potential impact
    3. Information about possible recoveries from insurance and other sources only if, and to the extent that it has been provided to the plaintiff(s) in a litigation contingency, it is discoverable either by the plaintiff or by a regulatory agency, or it relates to a recognized receivable for such recoveries. If the insurance company has either denied or contested the entity’s claim for recovery, the entity shall disclose that fact.
       
  11. Tabular Reconciliation


  12. For each period for which a statement of income is presented, public entities shall disclose reconciliations by class, in a tabular format, of recognized (accrued) loss contingencies to include all of the following:

    1. The carrying amounts of the accruals at the beginning and end of the period
    2. Increases (that is, amount accrued during the period) for new loss contingencies recognized during the period
    3. Increases for changes in estimates for loss contingencies recognized in prior periods
    4. Decreases for changes in estimates for loss contingencies recognized in prior periods
    5. Decreases for cash payments or other forms of settlements during the period.

    An entity shall describe the significant activity in the reconciliation and disclose the line items in the statement of financial position in which recognized (accrued) loss contingencies are included. All loss contingencies recognized in a business combination shall be included in the reconciliation but shown separately if they have a different measurement attribute (for example, fair value versus probable loss amount).

  13. Scope


  14. The Board decided that the disclosures shall apply to all entities except that the tabular reconciliation of accrued contingencies is not required for nonpublic entities.

  15. Reexposure


  16. The Board decided that the draft standard should be re-exposed and that the Exposure Draft should have a 30-day comment period.

  17. Effective Date


  18. The new guidance shall be effective for fiscal years ending after December 15, 2010, and interim and annual periods in subsequent fiscal years except that for nonpublic entities the new guidance shall be effective for the first annual period beginning after December 15, 2010, and for interim periods of fiscal years subsequent to the first annual period.

  19. The Board directed the staff to begin drafting the revised Exposure Draft.
     
  20. The Board expects to issue the Exposure Draft in the second quarter of 2010 that will have a 30-day comment period.

Disclosures about an employer's participation in a multiemployer plan. At today’s meeting, the Board discussed the following issues:
  1. Alternative disclosure requirements
  2. Transition requirements
  3. Issuance of an Exposure Draft
  4. Comment period for the Exposure Draft
Alternative Disclosure Requirements

The Board agreed on the staff’s recommendation for an employer to disclose both quantitative and qualitative information about its participation in a multiemployer plan. This will inform the financial statement users about the employer’s commitment to the plan and the effect of future cash flows. The proposed disclosures are derived largely from the agreement between the employer and the plan. Additionally, some of the disclosure requirements are based on information that can be obtained by the employer from the plan under the requirements of the Pension Protection Act of 2006.

Transition Requirements

The Board agreed to make the disclosure requirements effective prospectively. The Board agreed to propose in the Exposure Draft that the new guidance should be effective for fiscal years ending after December 15, 2010, except that for nonpublic entities the new guidance should be effective for the first annual period beginning after December 15, 2010.

Issuing an Exposure Draft

The Board directed the staff to draft an Exposure Draft of a proposed Accounting Standards Update for vote by written ballot.

Comment Period

The Board decided that the Exposure Draft should be exposed for a 60-day comment period and directed the staff to solicit comments from the constituents that may be affected by the final standard.


Insurance contracts. The Board discussed whether certain changes in insurance liabilities should be recognized in net income or other comprehensive income. The Board tentatively decided:
  1. Not to change the accounting for an insurer’s assets in this project
  2. Not to permit or require the use of other comprehensive income for insurance contracts.

Statement of comprehensive income. The Board discussed the transition requirements for the proposed Accounting Standards Update on the statement of comprehensive income.

The Board tentatively decided:
  1. To require full retrospective application
  2. Not to require any transition disclosures
  3. To permit early adoption.