Action Alert No. 04-16 April 22, 2004

FASB: Action Alert No. 04-16

Action Alert No. 04-16
April 22, 2004


(Board meetings are available by audio webcast and telephone.)

Wednesday, April 28, 2004, 9:00 a.m.

  1. FASB Staff Positions (FSPs). The Board will consider whether to direct the staff to issue as final the following proposed FSPs: (Estimated 15-minute discussion.)

    1. FSP FAS 141-a and FAS 142-a, “Interaction of FASB Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and EITF Issue No. 04-2, ‘Whether Mineral Rights Are Tangible or Intangible Assets’”

    2. FSP FIN 46(R)-a, “Technical Correction of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, Relating to Its Effects on Question No. 12 of EITF Issue No. 96-21, ‘Implementation Issues in Accounting for Leasing Transactions involving Special-Purpose Entities.’”

  2. Open discussion. If necessary, the Board will allow time to discuss minor issues with staff members on technical projects or administrative matters. Those discussions are held following regular Board meetings as topics come up.


No education sessions are planned for the week of April 26, 2004. The next scheduled education session will be May 4, 2004, and that session’s topics will be posted to the FASB calendar four days prior to the education session.


The Board Actions are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public hearings, and through other communication channels. Decisions become final only after a formal written ballot to issue a final Statement or Interpretation.

April 14, 2004 Board Meeting

Business combinations: purchase method procedures. The Board discussed clarifications and potential changes to the October 2003 FASB-IASB joint decision about which assets and liabilities should be considered part of a business combination and reached the following decisions:

  1. As a general principle, the acquirer should recognize the assets acquired and liabilities assumed as part of the combination at their fair values at the acquisition date.

  2. The substance of transactions entered into by parties to the combination (the acquirer, the acquiree, and the owners of the acquiree) should be assessed to determine whether they were arranged to achieve an accounting result favorable to the acquirer and, thus, should be excluded from the accounting for the combination. For example, a transaction should be excluded from the business combination if it was structured for the purpose of avoiding the expense recognition by the acquirer of (a) transaction costs incurred related to the combination or (b) termination or other postcombination exit costs.

  3. The following factors (which are neither mutually exclusive nor individually conclusive) should be considered in assessing whether a transaction was arranged to achieve an accounting result favorable to the acquirer:

    1. The timing of the obligating event or transaction
    2. The reason for the contract or transaction
    3. The party that initiated the contract or transaction
    4. Whether the acquiree (or its owners) or the combined entity is the most significant beneficiary of the arrangement.

The Board also discussed the effective dates for the proposed Statements on purchase method procedures and noncontrolling interests and decided that both Statements should be effective for financial statements issued for fiscal years beginning after December 15, 2005. Earlier adoption would be encouraged provided that the provisions of both Statements are adopted at the same time.

Short-term convergence: income taxes. The Board discussed issues concerning the recognition of deferred taxes on the initial acquisition of an asset other than a business combination. The Board agreed to defer any decisions on this issue until it has the opportunity to discuss it with the IASB at the joint IASB/FASB Board meeting on April 22, 2004.

Liability extinguishment. The Board discussed the scope, direction, and priorities of the broad-scope project on liability extinguishment. The Board reached the following decisions:

  1. The first project priority is to support the revenue recognition project by considering how the liability derecognition criteria in paragraphs 16(a) and (b) of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, would be applied in the context of derecognizing performance obligations. If those criteria are determined not to be operational, the Board will explore other approaches for derecognition of performance obligations.

  2. The second project priority is to address whether and, if so, how to clarify paragraph 16(b) in Statement 140 to address specific practice questions.

  3. The third project priority is to consider whether the existing liability derecognition guidance in Statement 140 also should apply to liabilities that are explicitly excluded from the scope of that Statement (for example, accounting for leases and postretirement benefits) and, if so, whether or not to amend the requirements of those Statements. The Board also directed the staff to consider the applicability of that guidance to other circumstances such as FASB Statement No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings, and EITF Issue No. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments.”

The Board decided that it was not necessary to solicit public comment on the scope and direction of this project through the issuance of a prospectus. The Board directed the staff to form a project resource group to assist it in identifying issues and proposed solutions for the Board’s consideration.

Certain costs and activities related to property, plant, and equipment. The Board removed this project from its agenda and no further Board discussion is planned. (For a more complete summary of the discussion, see the AcSEC Clearance section below.)


April 14, 2004 Board Meeting

AcSEC document: certain costs and activities related to property, plant, and equipment. The Board met with representatives of the AICPA's Accounting Standards Executive Committee (AcSEC) and discussed clearance of a final draft of the AICPA Statement of Position (SOP), Accounting for Certain Costs and Activities Related to Property, Plant, and Equipment, which, if cleared by the Board, would have been issued concurrently with an FASB Statement to amend APB Opinions No. 20, Accounting Changes, and No. 28, Interim Financial Reporting, and FASB Statements No. 51, Financial Reporting by Cable Television Companies, and No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, and rescind FASB Statement No. 73, Reporting a Change in Accounting for Railroad Track Structures. The Board objected to clearance of that SOP.

The Board removed this project from its agenda and no further Board discussion is planned. The Board indicated that the work performed by AcSEC would be retained for use in connection with any future convergence efforts with the IASB relating to property, plant, and equipment. Furthermore, some Board members suggested that the FASB staff should review the final draft of that SOP to identify any specific issues that may be appropriate to address through FASB Staff Positions.


The FASB plans to hold public roundtable meetings on its March 31, 2004 Exposure Draft, Share-Based Payment, on June 24, 2004, in Palo Alto, California, and June 29, 2004, in Norwalk, Connecticut. The purpose of those roundtable meetings is to listen to the views of and obtain information from interested constituents about that Exposure Draft. Any individual or organization desiring to participate must notify the FASB by sending an email to by May 17, 2004. The email notification should specify the location of the roundtable meeting in which the individual or organization desires to participate. The Board plans to have a wide variety of constituents—including investors, preparers of financial statements, auditors, valuation experts, and others—participate at each roundtable meeting. Depending on the number of responses received, the Board may not be able to accommodate all requests to participate. Notifications of selection status will be distributed by June 9, 2004.

Copies of all written submissions and minutes of the roundtable meetings will be publicly available on this website.


The following is a list of open meetings tentatively scheduled through May. Because schedules may change, please check the FASB calendar before finalizing your plans. Revisions to this list since the last issue of Action Alert are highlighted in bold.

Tuesday, May 4, 2004—FASB Education Session
Wednesday, May 5, 2004—FASB Board Meeting
Monday, May 10, 2004—Liaison Meeting with the American Petroleum Institute
Tuesday, May 11, 2004—Small Business Advisory Committee Meeting
Wednesday, May 12, 2004—FASB Board Meeting
Wednesday, May 12, 2004—FASB Education Session
Tuesday, May 18, 2004—Liaison Meeting with the Equipment Leasing Association
Tuesday, May 18, 2004—FASB Liabilities and Equity Resource Group Meeting
Wednesday, May 19, 2004—FASB Board Meeting
Wednesday, May 19, 2004—FASB Education Session
Tuesday, May 25, 2004—Qualifying Special-Purpose Entities Roundtable Discussion
Wednesday, May 26, 2004—FASB Board Meeting
Wednesday, May 26, 2004—FASB Education Session