FASB Summary of January 12, 2000 Board Meeting Discussion
Derivatives Implementation Group
Summary of January 12, 2000 Board Meeting Discussion on Statement 133 Implementation Issues
Derivatives and hedging-possible amendment of Statement 133. The Board discussed the provisions of paragraph 10(b) of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which exclude certain derivative instruments from the requirements of Statement 133 if those contracts qualify as normal purchases or normal sales of something other than a financial instrument or derivative instrument. The discussion focused on whether to expand the applicability of the scope exception for normal purchases and normal sales.
The Board decided that the normal purchases and normal sales exception in paragraph 10(b) also should apply to contracts that implicitly or explicitly permit net settlement, as discussed in paragraphs 9(a) and 57(c)(1). Under Statement 133, those contracts are currently precluded from qualifying for the normal purchases and normal sales exception. The Board decided not to extend the normal purchases and sales exception to contracts that have a market mechanism as discussed in paragraph 9(b) and 57(c)(2).