FASB Summary of May 5, 2004 Board Meeting Discussion

FASB: Summary of May 5, 2004 Board Meeting Discussion

Derivatives Implementation Group

Summary of May 5, 2004 Board Meeting Discussion on Statement 133 Implementation Issues

Financial instruments: derivatives implementation. The Board discussed possible revisions to Implementation Issue No. G25, "Hedging the Variable Interest Payments in a Group of Prime-Rate-Based Interest-Bearing Loans," that would allow entities to use the first-interest-payments-received technique (described in Question 2 of that Implementation Issue) under certain circumstances. The Board directed that the staff analyze the ramifications of those possible revisions and determine the most effective way for Board-directed guidance to be communicated. The staff will prepare a draft of those revisions for discussion at the May 12, 2004 Board meeting.

Agenda decision: request to amend Statement 133. The Board discussed a request to amend FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to permit (a) hedging entities to designate the risk of changes in only certain aspects of a nonfinancial asset’s fair value as the hedged risk in a fair value hedge, and (b) a similar bifurcation of risks for cash flow hedge accounting related to nonfinancial assets. The Board directed the staff to obtain more information from the constituents who had requested the amendment. The Board will continue its discussion at the May 12, 2004 Board meeting.