Action Alert No. 03-39
October 1, 2003



Wednesday, October 8, 2003, 9:00 a.m.

  1. Business combinations: purchase method procedures. The Board will discuss the following business combination issues:


    1. Clarifications to the April 22, 2003 decision about determining which assets or liabilities are part of the business combination accounting. Under the Board’s decision, in addition to the acquired business’s assets and liabilities, certain other assets or liabilities exchanged among the parties to the combination would be included in the business combination accounting at the acquisition date. In order to be recognized as part of the business combination, the item must (i) meet the definition of an asset or liability and (ii) be directly related to and essential to the business combination. The Board will discuss clarifications and examples of those two requirements.


    2. Clarifications to the December 12, 2001 decision about the intended application of the measurement period (formerly "allocation period"), including whether the measurement period should apply to measures of the business acquired, including items of the consideration paid.


    3. If the consideration paid to acquire a business exceeds the fair value of that business, whether that excess should be expensed on the acquisition date.


    4. Remaining differences in the FASB and the IASB’s conclusions in this joint project.


    The Board also will continue its discussions of the accounting for and reporting of noncontrolling interests. The Board will discuss how a partially owned subsidiary’s income and losses should be attributed between the controlling and noncontrolling interests. (Estimated 90-minute discussion.)

  2. Equity-based compensation. The Board will discuss the definition of market, performance, and service conditions as they relate to equity-based compensation. (Estimated 60-minute discussion.)


  3. Consolidation of variable interest entities. The Board will discuss remaining issues relating to the proposed modification of FASB Interpretation No. 46, Consolidation of Variable Interest Entities. (Estimated 30-minute discussion.)


  4. 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.


Friday, October 10, 2003, 2:00 p.m.

AcSEC document. The Board will meet with representatives of the AICPA’s Accounting Standards Executive Committee (AcSEC) to consider clearance of a final AICPA Statement of Position, Accounting for Loans or Certain Debt Securities Acquired in a Transfer. (Estimated 60-minute discussion.)


Wednesday, October 8, 2003, immediately following the Board meeting

The Board will hold an educational, non-decision-making session to discuss topics that are anticipated to be discussed at the October 15 Board meeting. Those topics will be posted to the FASB calendar four days prior to the education session.


The University Club
1 West 54th Street
New York, New York

Tuesday, October 7, 2003, 9:00 a.m. to approximately 4:30 p.m.

The Board and the User Advisory Council will meet to discuss the Board’s projects on:

  1. Disclosures about pension plans
  2. Equity-based compensation
  3. Financial performance reporting
  4. Revenue recognition.


We request that those who plan to observe this meeting preregister because space is limited. Please complete and submit the Observer Registration Form on the FASB website by noon on Friday, October 3. Observers will be required to check in upon arrival at the meeting. We will admit those who have not given advance notification only if space permits.


Thursday, October 9, 2003, 1:00 p.m.

The Board will meet with representatives of the Senior Roundtable Steering Committee of the National Investor Relations Institute to discuss matters of mutual interest.


Friday, October 10, 2003, 10:00 a.m.

The Board will meet with the Private Companies Practice Section Technical Issues Committee of the AICPA to discuss matters of mutual interest.


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.

September 24, 2003 Board Meeting

Agenda decision: interpretation of Statement 87. The Board discussed adding a limited-scope project to its agenda that would lead to an interpretation of FASB Statement No. 87, Employers' Accounting for Pensions, with respect to determining the measurement of costs and obligations under "cash balance" pension plans. The Board based its agenda decision on issues that it asked the staff to further consider regarding plans with variable interest-crediting rates that were not resolved by EITF Issue No. 03-4, "Determining the Classification and Benefit Attribution Method for a ‘Cash Balance’ Pension Plan." Issue 03-4, that was discussed at the March 20, 2003 and May 15, 2003 EITF meetings, and at the May 28, 2003 Board meeting, was limited in scope to plans with fixed interest-crediting rates.

The Board decided to add this project to its agenda and agreed that the scope of the project will be limited to the measurement of the costs and obligations under "cash balance" plans with variable interest-crediting rates. Other fundamental aspects of pension accounting under Statement 87 will not be reconsidered in this project.

Permitted activities of qualifying special-purpose entities (SPEs). The Board continued its redeliberations of the issues addressed by FASB Exposure Draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, and reached the following decisions:

  1. The legal isolation requirements would be applied only to those affiliates included in the consolidated financial statements in which a transferor is reporting the results of a transfer. In some circumstances, the accounting for a transfer in the financial statements of a parent company would be different from the accounting in the separate financial statements of a subsidiary.


  2. Reissuance of beneficial interests would be defined as the issuance of beneficial interests to provide cash or assets with which to repay existing beneficial interests held by parties other than the transferor.


  3. In the case of a qualifying SPE that reissues beneficial interests, no party should be permitted to hold combinations of rights and obligations that provide it with an opportunity to obtain more than a trivial incremental benefit as compared with similar rights and obligations held by separate parties. (This decision will be discussed further at the October 1, 2003 Board meeting.)


  4. A qualifying SPE would be prohibited from holding equity instruments, unless they are received as a result of efforts to collect its financial assets.


  5. The definition of equity instrument would be the same as the definition of equity security in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, but the word security would be replaced with instrument.


The Board also discussed the types of derivatives a transferor could enter into and support commitments that a transferor could provide but reached no decisions. Further discussion on these topics is planned for a subsequent Board meeting.


Comment Period Shortened for Proposed FSP FIN 46-e, “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities, for Certain Interests Held by a Public Entity”

On October 1, 2003, in response to comments received, the Board directed the staff to shorten the comment period for proposed FSP FIN 46-e. This proposed FSP was posted to the FASB website on September 19, 2003, for a 30-day comment period ending October 20, 2003. The Board directed the staff to make its best efforts to finalize this FSP on October 8, 2003. Because of the acceleration of this FSP, any comments on it should be submitted no later than October 7, 2003.


On October 1, 2003, a majority of the Board directed the FASB staff to release the proposed FSP FAS 150-c, "Effective Date and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities of FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," for public comment.

Also, a majority of the Board did not object to the release of the following proposed FSPs for public comment:

FSP FAS 150-d, "Issuers’ Accounting for Employee Stock Ownership Plans under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity"

FSP FIN 45-a, "Whether FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, Provides Support for Subsequently Accounting for a Guarantor’s Liability at Fair Value."

Those three proposed FSPs were posted to the FASB website on October 1, 2003, and comments are requested by October 31, 2003.


The following is a list of open meetings tentatively scheduled through November. 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.

Wednesday, October 15, 2003—FASB Board Meeting
Wednesday, October 15, 2003—FASB Education Session
Wednesday, October 22, 2003— Tripartite FASB/IASB/AcSB Meeting, Toronto, Canada
Thursday, October 23, 2003—Joint FASB/IASB Meeting, Toronto, Canada
Wednesday, October 29, 2003—FASB Board Meeting
Wednesday, October 29, 2003—FASB Education Session
Tuesday, November 4, 2003—Liaison Meeting with the American Gas Association
Wednesday, November 5, 2003—FASB Board Meeting
Wednesday, November 5, 2003—FASB Education Session
Monday, November 10, 2003—Liaison Meeting with the American Academy of Actuaries
Tuesday, November 11, 2003—FASB Board Meeting
Tuesday, November 11, 2003—FASB Education Session
Wednesday, November 12, 2003—EITF Meeting
Thursday, November 13, 2003—EITF Meeting
Wednesday, November 19, 2003—FASB Board Meeting
Wednesday, November 19, 2003—FASB Education Session
Tuesday, November 25, 2003—FASB Education Session
Wednesday, November 26, 2003—FASB Board Meeting
Wednesday, November 26, 2003—FASB Education Session