FASB Summary of April 22, 2003 Board Meeting Discussion
Derivatives Implementation Group
Summary of April 22, 2003 Board Meeting Discussion on Statement 133 Implementation Issues
Financial instruments: derivatives implementation. At its April 22, 2003 meeting, the Board discussed a proposal to broaden the circumstances in which a price adjustment feature in a purchase or sales contract would not be an impediment to qualifying for the normal purchases and normal sales scope exception under Statement 133 Implementation Issue No. C11, “Interpretation of Clearly and Closely Related in Contracts That Qualify for the Normal Purchases and Normal Sales Exception.” The Board did not object to pursuing that proposal, under which a price adjustment would not be an impediment to qualifying for that scope exception if it is based on the changes in an underlying (such as a price index) for which there is a high expectation that, over the term of the contract, the percentage change in the underlying will be within an 80-to-120 percent range of the percentage change in the fair value of the item being purchased or sold under the contract or in the fair value of an ingredient or a direct factor in the production of that item. The staff plans to post that modified tentative guidance on the FASB website for public comment.