Action Alert No. 05-42 October 20, 2005

FASB: Action Alert No. 05-42

Action Alert No. 05-42
October 20, 2005

NOTICE OF MEETINGS

OPEN JOINT IASB AND FASB BOARD MEETINGS
(Board meetings are available by audio webcast and telephone.)

Monday, October 24, 2005, 9:00 a.m.

  1. Comprehensive business reporting model. Representatives of CFA Institute will discuss with the Boards its soon-to-be-issued comprehensive business reporting model. (Estimated 1.25-hour discussion.)

  2. Performance reporting by business entities. The Boards will discuss (a) the value in providing a category on the financial statements that distinguishes financing type transactions and events from other types of transactions and events and (b) any pending issues related to issuance of the Exposure Draft for Segment A. (Estimated 1.75-hour discussion.)

  3. Revenue recognition. The Boards will discuss (a) certain clarifications of recent decisions about the initial identification and measurement of performance obligations using an allocation of the customer consideration amount, (b) illustrative examples that apply those decisions to a range of revenue transactions, and (c) certain issues related to the definition of revenues, including the definition of customer. (Estimated 2.5-hour discussion.)

  4. Short-term convergence: income taxes. The Boards will discuss their different approaches to (a) accounting for uncertain tax positions and (b) the timing of the uncertain tax positions project. The Boards also will discuss certain issues related to their decision to measure deferred taxes using the undistributed rate. (Estimated 1.5-hour discussion.)

Tuesday, October 25, 2005, 9:00 a.m.

  1. Financial instruments. The Boards will discuss (a) long-term objectives for reporting financial instruments and (b) reporting information about changes in fair values of financial instruments. (Estimated 1.5-hour discussion.)

  2. Conceptual framework. The Boards will discuss the following matters: (a) suggestions for improving the process for assessing for qualitative characteristics of financial information, (b) whether the objectives of financial reporting and qualitative characteristics of financial information would differ for particular types of business entities (for example, small versus large, private versus public), (c) a milestone draft for the objectives of financial reporting section of a due process document, including considerations about seeking constituents’ comments, and (d) project status, plans, and priorities. (Estimated 2.5-hour discussion.)

OPEN FASB INSURANCE INDUSTRY FORUM

Wednesday, October 26, 2005, 10:30 a.m. – 4:30 p.m.

The Board will meet with representatives of several insurance industry representational organizations and others to discuss matters of mutual interest.

OPEN ROUNDTABLE DISCUSSIONS WITH RESPONDENTS TO THE FASB EXPOSURE DRAFTS ON BUSINESS COMBINATIONS
(This meeting is available by audio webcast and telephone.)

Thursday, October 27, 2005, 9:00 a.m. – 12:00 p.m. and 1:00 p.m. – 4:00 p.m.

The Board will hold public roundtable discussions to listen to the views of and obtain information from respondents to the June 30, 2005 FASB Exposure Drafts, Business Combinations, and Consolidated Financial Statements, Including Accounting and Reporting of Noncontrolling Interests in Subsidiaries.

BOARD ACTIONS

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 roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue a final Statement, Interpretation, or FSP.

October 12, 2005 Board Meeting

Grant date. The Board discussed comments received from respondents on the proposed FSP FAS 123(R)-b, “Practical Exception to the Application of Grant Date as Defined in FASB Statement No. 123(R).” Specifically, the Board addressed the transition provisions in the FSP, performance conditions in which all the key terms and conditions of an award are not communicated to an employee, and certain drafting considerations. The Board decided:

  1. The transition provisions in the final FSP will be modified so that entities that have already adopted Statement 123(R) would be able to apply the FSP, once it's been issued, in the earliest reporting period for which financial statements or interim reports have not been issued.

  2. Communication of specific performance targets is consistent with the principles of mutual understanding included in the definition of grant date in Statement 123(R).

  3. Explicit modification guidance regarding changes in the key terms and conditions of an award subsequent to the criteria established in the proposed FSP (that is, a grant date) would not be added to the final FSP.

The Board directed the staff to proceed with a draft of the final FSP for vote by written ballot. Subsequently, final FSP FAS 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R),” was issued on October 18, 2005, and is available on the FASB website.

Useful life and amortization of intangible assets. The Board discussed proposed transition, effective date, and comment period for a proposed FSP that will amend the guidance on certain aspects of FASB Statement No. 142, Goodwill and Other Intangible Assets, as it relates to the determination of the useful life and amortization of renewable intangible assets. Specifically, the Board decided:

  1. The provisions of the proposed FSP would be applied (a) prospectively for all preexisting renewable intangible assets that are renewed subsequent to the effective date of the proposed FSP and (b) prospectively for all renewable intangible assets that are acquired subsequent to the effective date.

  2. The provisions of the proposed FSP would be effective for interim and annual periods beginning after June 15, 2006.

  3. The comment period for the proposed FSP would be 90 days.

The Board directed the staff to proceed with a draft of the proposed FSP for vote by written ballot.

Issues involved in accounting for certain derivative contracts (formerly measuring fair value of certain derivative contracts under Statement 133). The Board clarified certain of its previous decisions relating to the issuance of a proposed FSP on accounting for unrealized gains (losses) relating to derivative instruments measured at fair value under FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities. Specifically:

  1. The Board decided not to require disclosure of the fair value of the derivative instrument at initial recognition. Therefore, the proposed FSP would require disclosures about unrealized gains (losses) at initial recognition of the derivative instrument, segregating unrealized gains (losses) recognized in income and those recognized as a deferred credit (debit). The proposed FSP also would require a reconciliation of the beginning and ending deferred balance(s) during the period, indicating where in the statement of financial position the deferred amounts are reported.

  2. The Board affirmed that under the final Statement on fair value measurements, the determination of where within the fair value hierarchy an estimate of fair value falls would depend on where within the fair value hierarchy the inputs that have a significant effect on the estimate fall. The Board clarified that the requirement to consider the significance of the inputs on the estimate is not intended to prescribe a formulaic sensitivity analysis of the data. The Board decided not to provide incremental guidance for making that determination in the FSP.

Proposed FSP FAS 133-a, “Accounting for Unrealized Gains (Losses) Relating to Derivative Instruments Measured at Fair Value under Statement 133,” is expected to be issued on October 21, 2005, and will be available on the FASB website. Comments will be requested by November 21, 2005. The proposed FSP will refer to certain aspects of the guidance in a final Statement on fair value measurements. A working draft of that Statement also is expected to be available on the FASB website on October 21, 2005.

EITF ANNOUNCEMENT

At its October 10, 2005 meeting, the EITF Agenda Committee added a new issue to the EITF Agenda on accounting for payments made by a service provider to equipment manufacturers and/or retailers/resellers of specialized equipment that is necessary for a customer to receive a service from the service provider.

FUTURE OPEN MEETINGS

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, November 2, 2005—No Board Meeting Scheduled
Wednesday, November 2, 2005—FASB Education Session
Monday, November 7, 2005—Liaison Meeting with American Gas Association
Wednesday, November 9, 2005—No Board Meeting Scheduled
Wednesday, November 9, 2005—FASB Education Session
Wednesday, November 9, 2005—Business Combinations Roundtable Meetings, London
Thursday, November 10, 2005—FASB Board Meeting
Wednesday, November 16, 2005—FASB Board Meeting
Wednesday, November 16, 2005—FASB Education Session
Tuesday, November 22, 2005—FASB Board Meeting
Tuesday, November 22, 2005—FASB Education Session
Tuesday, November 29, 2005—FASB Board Meeting
Tuesday, November 29, 2005—FASB Education Session
Wednesday, November 30, 2005—Small Business Advisory Committee