SUMMARY OF BOARD DECISIONS

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 an Accounting Standards Update.

November 11, 2009 Board Meeting

Statement 167 implementation.The Board discussed several issues related to the implementation of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R), for certain types of asset manager funds, and made the following decisions:

The effective date of Statement 167 will be deferred for certain funds until the joint IASB/FASB consolidations project is completed (late 2010). The deferral prescribes that Statement 167 will not be effective for a reporting entity’s interest in an entity, as long as the reporting entity and the entity meet all of the following conditions:
  1. The entity has all of the attributes specified in paragraph 946-10-15-2 or, if one or more of the attributes specified in paragraph 946-10-15-2 are not present, is in an entity for which it is industry practice to issue financial statements using guidance that is consistent with the measurement principles in Topic 946.
  2. The reporting entity does not have an obligation to fund losses of the entity that could potentially be significant to the entity. This condition should be evaluated considering any implicit or explicit guarantees by the reporting entity.
  3. The reporting entity does not have an interest in the entity that absorbs a disproportionate share of the entity’s actual losses to other investors.
Examples of entities that may meet these conditions include, but are not limited to, mutual funds, hedge funds, private equity funds and venture capital funds. Examples of entities that do not meet these criteria include, but are not limited to, securitization entities, asset-backed financing entities, or entities formerly classified as qualifying special purpose entities. Deferring the effective date of Statement 167 for those entities will allow the FASB to resolve issues about how to distinguish between a principal and agent relationship jointly and consistently with the IASB.

The Board also decided to defer the effective date of Statement 167 for money market mutual funds that are required to comply with or operate within the requirements of Rule 2a-7 of the 1940 Investment Company Act until the joint IASB/FASB consolidations project is completed (late 2010).

The guidance in paragraph B22(c), with regards to how related parties affect the analysis performed under paragraph B22, will be amended to clarify the Board’s intent that guidance concerning related parties would be considered when evaluating all conditions in paragraph B22.

The Board decided to amend guidance in condition (c) of paragraph B22 to clarify that a qualitative analysis similar to that required in paragraph 14A(b) was the Board’s intent when considering other variable interests of a decision-maker in a variable interest entity and the variability associated with the other variable interest under condition (c) of paragraph B22.

The Board directed the staff to proceed to a draft of an Exposure Draft of a proposed Accounting Standards Update for vote by written ballot accompanied by a comment period of 30 days.


Reconsideration of the scope of Statement 160. The Board discussed comments received on Proposed Accounting Standards Update, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification. The Board affirmed its proposal that the decrease in ownership provisions of Topic 810 would apply to subsidiaries or groups of assets that are businesses or nonprofit activities, but would not apply to sales of in-substance real estate even if the real estate would be considered a business.

The Board clarified the guidance for accounting for decreases in ownership of subsidiaries that are not businesses or nonprofit activities. The Board decided that an entity should evaluate the substance of the transaction and determine whether guidance outside Topic 810 addresses the accounting for that transaction. If the substance of the transaction is not addressed by other guidance, the entity should then apply the guidance in Topic 810.

The Board affirmed that the amendments to Topic 810 will be effective for periods ending on or after December 15, 2009 and should be applied retrospectively for entities that have already adopted the guidance in Subtopic 810-10. The Board directed the staff to proceed to a draft of a final Accounting Standards Update for vote by written ballot.


Oil and gas disclosures. The Board discussed comments received on Proposed Accounting Standards Update, Extractive Industries—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. The Board affirmed the main provisions of the Proposed Update, including:
  1. Expanding the definition of oil- and gas-producing activities to include the extraction of saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coalbeds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction.
  2. Amending the definition of proved oil and gas reserves to indicate that entities must use the average, first-day-of-the-month price during the 12-month period before the ending date of the period covered by the report rather than the year-end price, when estimating reserve quantities that are economical to produce (and when calculating the standardized measure of discounted future net cash flows).
  3. Requiring that an entity separately disclose information about reserve quantities, the standardized measure of cash flows, and certain financial statement derived amounts for geographic areas that represent 15 percent or more of total proved reserves.
  4. Clarifying that an entity’s equity-method investments must be considered in determining whether it has significant oil- and gas-producing activities.
Additionally, the Board made the following decisions regarding disclosures about equity method investments, definition of terms, transition, and effective date.

Disclosures about Equity Method Investments

The Board affirmed its decision to require a reporting entity to disclose the same level of detail for equity method investments as is disclosed for consolidated subsidiaries. An entity will apply the principle of materiality to determine whether detailed disclosures need to be provided about an equity method investment. The Board decided to include a practicability exception in the limited event the entity is not able to obtain the information necessary to provide the detailed disclosures about an equity method investment.

The Board made the following additional decisions regarding disclosures about equity method investments:
  1. The alternative presentation of equity method investments proposed in the appendix of the Proposed Update will not be permitted. The alternative presentation proposed to retain current aggregate disclosure about equity method investments by geography and product (where applicable), but would permit an entity to combine all equity method geographies and products when presenting the more disaggregated components (that is, the details) of those investments.
  2. A reporting entity will be permitted to present the total of consolidated entity and equity method investee amounts for reserve quantities and standardized measure of cash flows. An entity will not be permitted to present the total of consolidated entity and equity method investee amounts when those amounts are derived from the financial statements.
Definitions of Terms in the Master Glossary

The Board decided to amend the definition of exploratory well and not include the definition of extension well in the Master Glossary of the FASB Accounting Standards Codification™ to avoid the unintended consequence of changing the current accounting and disclosure practice for extension wells.

Transition and Effective Date

The Board decided that an entity will account for the adoption of the amendments to Topic 932, Extractive Activities—Oil and Gas, as a change in an accounting principle inseparable from a change in accounting estimate, but will not be required to provide the disclosures for such changes as set forth in Topic 250, Accounting Changes and Error Corrections. An entity will instead be required to disclose the following in all financial statements that include the period of change:
  1. The effect of the transition on income from continuing operations, net income, and any related per-share amount, if the effect of the transition is significant and practicable to estimate.
  2. Quantitative and qualitative disclosures of the estimated effect (or portion of the effect) of initially applying the amendments on each of the amounts and quantities disclosed, if those amounts are significant and practicable to estimate. An entity shall include the effect of applying the amendments to paragraph 932-10-05-2(d) in each of the amounts and quantities disclosed in accordance with Topic 932. An entity shall also separately provide quantitative and qualitative disclosures of the effect of initially applying the amendments to paragraph 932-10-05-2(d) on each of the amounts and quantities disclosed in accordance with this Topic, if the effect is significant and practicable to estimate. The amendments to paragraph 932-10-05-2(d) expand the definition of oil- and gas-producing activities to include extraction of saleable hydrocarbons from oil sands, shale, coalbeds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas.
An entity will be required to apply the amendments of Topic 932 in the first annual reporting period ending on or after December 31, 2009, unless it became subject to the disclosure requirements because of the change to the definition of significant oil- and gas-producing activities. An entity providing the disclosures for the first time as a result of that change in definition may apply the disclosure provisions of Topic 932 in periods beginning after December 31, 2009.

The Board directed the staff to draft a final Accounting Standard Update for vote by written ballot.


Improving disclosures about fair value measurements. The Board discussed comments received on Proposed Accounting Standards Update, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. The Board directed the staff to draft a final Accounting Standards Update for a vote by written ballot.

The Board decided to defer the consideration of the Level 3 sensitivity disclosures but proceed with all of the remaining requirements substantially as described in the proposed Update. The FASB plans to reconsider the Level 3 sensitivity disclosure requirements in the joint fair value measurement project. The final Update will amend Subtopic 820-10 as follows:
  1. New disclosure requirements
     
    1. Transfers in and/or out of Levels 1 and 2. A reporting entity should disclose the amounts of significant transfers in and/or out of Level 1 and Level 2 fair value measurements and the reasons for the transfers.
    2. Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present information about purchases, sales, issuances, and settlements on a gross basis rather than as one net number.
       
  2. Clarification of existing disclosure requirements
     
    1. Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity should apply judgment in determining the appropriate classes of assets and liabilities.
    2. Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3.
The final amendments to the Accounting Standards Codification will be effective for annual or interim reporting periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity for purchases, sales, issuances, and settlements on a gross basis. That requirement will be effective starting in annual periods beginning after December 15, 2010. Early adoption is permitted. The amendments in this Update do not require disclosures for earlier periods presented for comparative purposes at initial adoption. The Board expects to issue a final Update by the end of 2009.