Derivatives Implementation Group
Summary of March 31,
1999 Board Meeting Discussion on Statement 133 Implementation
Issues
The Board discussed the staff's tentative guidance
for the following six implementation issues regarding FASB
Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities:
- Issue No. B3,
"Investor's Accounting for a Put or Call Option Attached to a Debt
Instrument Contemporaneously with or Subsequent to Its
Issuance"
- Issue No. C6,
"Derivative Instruments Related to Assets Transferred in Financing
Transactions"
- Issue No. E2,
"Combinations of Options"
- Issue No. E3,
"Hedging with Intercompany Derivatives"
- Issue No. G2,
"Hedged Transactions That Arise from Gross Settlement of a
Derivative ('All-in-One' Hedges)"
- Issue No. G3, "Discontinuation of a
Cash Flow Hedge"
The tentative guidance in the above six issues was
based on the results of discussion by the Derivatives
Implementation Group and had been posted on the FASB web site since
January 1999.
The Board decided not to object to the staff's
issuing guidance in a question-and-answer format (Q&A) for the
first five implementation issues listed above. However, the Board
directed that the guidance on the last issue, Issue G3, be
partially modified. The Board did not object to the tentative
guidance that, if it is probable that the hedged forecasted
transaction will not occur by the end of the originally specified
time period but will occur within a specified additional period of
time thereafter, the derivative's gain or loss should continue to
be reported in accumulated other comprehensive income. However, the
Board directed that the specified additional period of time be
modified. The tentative guidance had specified that the additional
period of time was equal to 10 percent of the number of days
included in the originally specified time period (beginning on the
date of the inception of the hedge), not to exceed a maximum of 60
additional days. The Board decided that that additional period of
time should be a fixed period of two months beyond the end of the
originally specified time period that was documented at the
inception of the cash flow hedge.
The Board also decided that the FASB web site should
indicate that constituents who wish to submit comments regarding
the staff's tentative conclusions on implementation issues should
submit those comments within 35 days after they have been posted on
the web site to ensure an adequate time for the Board to consider
the constituents' views and concerns prior to the clearance
process. Each issue that has not yet been cleared by the Board will
indicate on the web site the date by which comments should be
submitted.
|
