FASB Summary of March 26, 2003 Board Meeting Discussion

FASB: Summary of March 26, 2003 Board Meeting Discussion

Derivatives Implementation Group

Summary of March 26, 2003 Board Meeting Discussion on Statement 133 Implementation Issues

Financial instruments: derivatives implementation. The Board discussed the staff’s proposed revisions to a number of Statement 133 Implementation Issues related to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Board reached the following decisions:

  • Did not object to the staff’s recommendation to post Statement 133 Implementation Issue No. C18, “Shortest-Period Criterion for Applying the Regular-Way Security Trades Exception to When-Issued Securities,” as cleared guidance on the FASB website.

  • Agreed that the cleared guidance in Statement 133 Implementation Issues No. C7, “Certain Financial Guarantee Contracts,” and No. J12, “Intercompany Derivatives and the Shortcut Method,” will be superseded by the forthcoming amendment of Statement 133.

  • Agreed that the uncleared guidance in the following issues should be withdrawn due to the forthcoming amendment of Statement 133:

    1. Statement 133 Implementation Issue No. A20, “Application of Paragraph 6(b) regarding Initial Net Investment”

    2. Statement 133 Implementation Issue No. C19, “Contracts Subject to Statement 35, Statement 110, or Statement of Position 94-4”

    3. Statement 133 Implementation Issue No. D2, “Applying Statement 133 to Beneficial Interests in Securitized Financial Assets (a Resolution of the Issues Raised in Implementation Issue D1)”

    4. Statement 133 Implementation Issue No. E21, “Continuing the Shortcut Method after a Purchase Business Combination.”

  • Did not object to the staff’s proposed revisions to a number of other Statement 133 Implementation Issues or to the staff’s plans to post the revised issues on the FASB website concurrent with the issuance of the amendment of Statement 133, which is expected in late April 2003.

The Board also discussed the need for implementation guidance regarding its previous decision that if a derivative instrument contains a financing element at its inception, the borrower should report all cash inflows and outflows associated with that derivative instrument in a manner consistent with financing activities as described in paragraphs 18–20 of FASB Statement No. 95, Statement of Cash Flows. The Board agreed that the requirement should apply only if an other-than-insignificant financing element is present at inception.