Revised 04/03/09—See below


Summary of Board decisions 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 standard.

April 1, 2009 Board Meeting

Revenue recognition. In the Discussion Paper, Preliminary Views on Revenue Recognition in Contracts with Customers, the FASB and the IASB propose a revenue recognition model based on increases in an entity’s net contract position. The entity’s net contract position is a contract asset or a contract liability depending on the combination of the remaining rights and performance obligations in the contract. In that model, an entity initially measures those rights and performance obligations at the transaction price—that is, the amount of promised customer consideration.

At this meeting, the Board discussed an issue that was not included in the Discussion Paper, that is, how an entity would determine the transaction price when the promised consideration is:

  1. Payable at a time significantly different from performance by the entity,
  2. Uncertain in amount, or
  3. In a form other than cash.

The Board decided that when measuring a net contract position, an entity would reflect the time value of money whenever that effect would be material. It would use the discount rate that would be reflected in a financing transaction between the entity and its customer that did not involve the provision of other goods and services. The reporting entity would report the effect of financing separately from the revenue from other goods and services.

The Board decided that when the customer consideration is uncertain (variable) in amount, the transaction price at inception is the amount of the expected customer consideration, defined as the probability-weighted estimate of customer consideration. An entity would update the measurement of rights to reflect changes in the transaction price and allocate those changes to the recognized performance obligations. The effects of those changes on satisfied performance obligations would be recognized as revenue in the period of change. However, the cumulative amount of revenue recognized would be limited to the amount of noncontingent consideration.

The Board tentatively decided that an entity should measure noncash consideration at fair value. If an entity cannot estimate reliably the fair value of noncash consideration, it should measure the consideration indirectly by reference to the selling price of the promised goods and services.

In future meetings, the Board will consider collectibility and some other contract-related issues, such as contract renewals and cancellations, and the combination and segmentation of contracts.

Statement 140 implementation: transfers of financial assets. The Board redeliberated significant issues related to the disclosures required in the proposed amendment to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

The Board made the following decisions:

  1. The proposed disclosures would be updated to reflect the results of the Board’s redeliberations of FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.

  2. The scope of the proposed sensitivity analysis disclosures would be finalized  as currently required by Statement 140 and would not be expanded. [Revised 4/3/09]
  3. The Board previously decided to require specific disclosures for securitization and asset backed financing arrangements where a transferor has continuing involvement with transferred financial assets accounted for as sales.   The Board decided to expand those requirements to all transfers of financial assets accounted for as sales where the transferor has continuing involvement with transferred financial assets.
  4. All disclosure requirements would apply to both nonpublic and public entities.
  5. An entity would disclose the nature of any beneficial interests received as proceeds from a sale of financial assets, and also disclose the inputs and valuation techniques used to value those beneficial interests.  
  6. An entity would disclose the maximum exposure to loss arising from its continuing involvement, except in the case of a secured borrowing.
  7. Further guidance on how to consider materiality or significance in relation to continuing involvements would not be provided.
  8. The reporting entity would not be required to disclose standardized categories of transferred financial assets in standardized tabular formats.
  9. An entity would not be required to disclose an analysis of the maturity of its repurchase obligations.
  10. An entity would not be required to disclose the amount of transfer activity (that qualifies for derecognition) in a reporting period when the transfer activity is not evenly distributed throughout the reporting period.

FASB ratification of EITF consensuses-for-exposure. The Board ratified the following consensuses-for-exposure reached by the EITF at its March 19, 2009 meeting.

  1. Issue No. 08-9, "Milestone Method of Revenue Recognition." The Board decided on a 30-day comment period.
  2. Issue No. 09-1, "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance." The Board decided on a 30-day comment period.

Reconsideration of Interpretation 46(R). The Board continued its redeliberations of the Exposure Draft, Amendments to FASB Interpretation No. 46(R), and reached the following decisions:

  1. Disclosures. The Board decided to retain the disclosure requirements applicable to Interpretation 46(R) within FSP FAS 140-4 and FIN 46(R)-8 with only minor editorial changes.   The Board also decided to add the following disclosure requirement to paragraph 24 of Interpretation 46(R) for situations in which an enterprise concludes that its power is shared (subject to refinement during drafting):
    If applicable, significant factors considered and judgments made in determining that power to direct the activities of a variable interest entity that most significantly impact its economic performance is shared pursuant to the guidance in paragraph 14X.
  2. Related party guidance (paragraph 16).   The Board decided to amend the criterion in paragraph 16(d)(1) of Interpretation 46(R) to provide an exemption for substantive mutual transfer restrictions based on mutually agreed upon terms by willing, independent parties.
  3. Related party guidance (paragraph 17) .   The Board decided to amend paragraph 17 of the Exposure Draft to eliminate factors (c) and (e) of that paragraph.   Additionally, the Board decided to explicitly emphasize in paragraph 17 that the individual parties within a related party group were required to first separately consider the consolidation guidance in paragraphs 14(a) and 14(b) of the proposed amendments before performing the existing analysis for determining which party, within a related party group, is the primary beneficiary of a variable interest entity.  The Board decided to amend paragraph 17 as follows (subject to refinement during drafting):
    In situations in which an enterprise concludes it does meet the criteria in paragraph 14(a) and (b) but, as a group, the enterprise and its related parties If two or more related parties (including the de facto agents described in paragraph 16) would be identified as the primary beneficiary of the entity, hold variable interests in the same variable interest entity, and the aggregate variable interest held by those parties would, if held by a single party, identify that party as the primary beneficiary, then the party within the related party group that is most closely associated with the variable interest entity is the primary beneficiary. The determination of which party within the related party group is most closely associated with the variable interest entity requires judgment and shall be based on an analysis of all relevant facts and circumstances, including:

    a. The existence of a principal-agency relationship between parties within the related party group

    b. The relationship and significance of the activities of the variable interest entity to the various parties within the related party group

    c. A party’s exposure to the expected losses of the variable interest entity

    d. The design of the variable interest entity.

    e. The extent to which a party meets criteria a and b in paragraph 14A.

  4. Separate classification of elements.   The Board decided to require separate classification of elements on the face of the primary beneficiary’s balance sheet for:

    1. Those assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs
    2. Those liabilities of consolidated VIEs for which creditors of the consolidated VIE have no recourse to the general credit of the primary beneficiary.
  5. Other. The Board decided to emphasize, in the Introduction to the proposed amendments to Interpretation 46(R), that in applying the provisions of the proposed amendments, terms, transactions, and arrangements, whether contractual or noncontractual, must be (a) substantive and (b) representative of economic reality and (c) not used in a manner to circumvent the purpose and provisions of the Interpretation.