Derivatives Implementation Group
Summary of January 12,
2000 Board Meeting Discussion on Statement 133 Implementation
Issues
Derivatives and hedging-possible amendment of
Statement 133. The Board discussed the provisions of paragraph
10(b) of FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which exclude certain
derivative instruments from the requirements of Statement 133 if
those contracts qualify as normal purchases or normal sales of
something other than a financial instrument or derivative
instrument. The discussion focused on whether to expand the
applicability of the scope exception for normal purchases and
normal sales.
The Board decided that the normal purchases and
normal sales exception in paragraph 10(b) also should apply to
contracts that implicitly or explicitly permit net settlement, as
discussed in paragraphs 9(a) and 57(c)(1). Under Statement 133,
those contracts are currently precluded from qualifying for the
normal purchases and normal sales exception. The Board decided not
to extend the normal purchases and sales exception to contracts
that have a market mechanism as discussed in paragraph 9(b) and
57(c)(2).
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