Derivatives Implementation Group
Summary of June 27, 2001
Board Meeting Discussion on Statement 133 Implementation Issues
Financial instruments: derivatives
implementation. At its June 27, 2001 meeting, the Board decided
not to object to the staff's issuing guidance in a
question-and-answer format (Q&A) for the following eight
Implementation Issues regarding FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities:
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Issue C15
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Normal Purchases and Normal Sales Exception for
Option-Type Contracts and Forward Contracts in Electricity
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Issue E20
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The Strike Price for Determining When a Swap Contains
Mirror-Image Call Provision
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Issue F10
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Definition of Firm Commitment in Relation to
Long-Term Supply Contracts with Embedded Price Caps or Floors
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Issue G20
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Assessing and Measuring the Effectiveness of an
Option Used in a Cash Flow Hedge
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Issue G21
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Determination of the Appropriate Hypothetical
Derivative for Floating-Rate Debt That Is Prepayable at Par at Each
Interest Reset Date
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Issue I2
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Near-Term Reclassification of Gains and Losses That
Are Reported in Accumulated Other Comprehensive Income
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Issue J18
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Foreign-Currency-Denominated Transactions Accounted
for under EITF Issue 88-18
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Issue K5
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Transition Provisions for Applying the Guidance in
Statement 133 Implementation Issues
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The Board suggested that Statement 133 Implementation
Issue No. C14, "Normal Purchases and Normal Sales Exception for
Electricity Contracts Subject to Being Booked Out," be deleted from
the website because it is no longer needed for electricity
contracts in view of the guidance in Implementation Issue C15. The
Board also did not object to a revision of Statement 133
Implementation Issue No. A14, "Derivative Treatment of Stock
Purchase Warrant for Shares Where Sale or Transfer Is Restricted,"
to avoid a misinterpretation of its scope. Similarly, the Board did
not object to a modification of the scope of the guidance in
Statement 133 Implementation Issue No. C10, "Can Option Contracts
and Forward Contracts with Optionality Features Qualify for the
Normal Purchases and Normal Sales Exception," to exclude those
option contracts that qualify for the normal purchases and normal
sales exception under Implementation Issue C15. The Board also
discussed the staff's proposed modification of the tentative
guidance in Statement 133 Implementation Issue No. B31, "Accounting
for Purchases of Life Insurance," which the staff planned to
circulate to the members of the Derivatives Implementation Group.
The Board suggested that the staff post the revised tentative
conclusions for Implementation Issue B31 on the website on June 29,
2001 and bring it for clearance in mid-July 2001.
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