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.
October 21, 2010 FASB/IASB Joint Board MeetingFair value measurement.
Disclosures about Fair Value Measurements
The Boards tentatively decided:
- That when a nonfinancial asset is measured subsequently at fair value and the highest and best use of the asset differs from its current use, an entity must disclose that fact and the reasons why the asset is being used in a manner that differs from its highest and best use. The Boards also tentatively decided to require that disclosure whether the asset is recognized at fair value in the statement of financial position or the fair value is disclosed and not to limit the scope of that disclosure to particular nonfinancial assets.
- To require an entity to disclose any transfers between Level 1 and Level 2 of the fair value hierarchy.
- For assets and liabilities not recognized at fair value but for which disclosure of fair value is required, to require an entity to disclose the level in which a fair value measurement would be categorized within the fair value hierarchy (Level 1, 2 or 3), even if those assets and liabilities are not subsequently measured at fair value in the statement of financial position. The other disclosure requirements for fair value measurements would not apply to such assets or liabilities.
The Boards tentatively decided that clarifying the unit of account for assets and liabilities measured at fair value in particular situations (for example, investments in debt and equity securities in accordance with FASB Accounting Standards Codification™ Topic 946, Financial Services—Investment Companies) is outside the scope of the fair value measurement project because the project focuses on “how” to measure fair value, not on “what” is being measured at fair value or “when” fair value should be used.
The Boards tentatively decided to clarify that although the highest and best use and valuation premise concepts are not relevant for financial instruments, the notion of value maximization is fundamental to the fair value measurement of financial instruments because market participants would enter into transactions that maximize the fair value of financial instruments.
Emissions trading schemes. The Boards discussed the measurement of allowances (assets) and liabilities in a cap and trade scheme.
The Boards tentatively decided that the measurement of the allocated allowances and the liability for the allocation should be consistent. Board members expressed support for the model that measures the allocated allowances and liability for the allocation initially at fair value and that also subsequently measures those allocated allowances at fair value.
The Boards also discussed how an entity should determine the quantity of allowances that would be returned under the liability for the allocation, as well as when an entity should recognize an obligation for emissions in excess of the liability for the allocation. The Boards expressed support for an approach that determines the quantity of allowances to be returned on the basis of an entity’s expectations of emissions or emissions reductions. However, the Boards expressed different views as to when the liability for excess emissions should be recognized. The Boards requested additional analysis, including quantitative examples that outline the effect of different measurement models.
At future meetings, the Boards will discuss quantitative examples that illustrate measurement issues, and when a liability is incurred for emissions in excess of the liability for the allocation. The Boards will also discuss the issues of presentation (including netting) and whether a right to future allocations can be recognized as an asset.
Accounting for financial instruments: impairment. The Boards discussed comment letter feedback from the FASB exposure related to impairment and interest income and central issues related to impairment. This was an education session and no decisions were made. The Boards will further discuss issues related to impairment at future meetings.
Offsetting of financial assets and liabilities. The Boards discussed factors that may be helpful in determining whether financial assets and liabilities should be presented net (either on the face of the financial statement or in the notes). This was an education session and no decisions were made. The Boards will discuss possible offsetting approaches at future meetings.
October 22, 2010 FASB/IASB Joint Board Meeting
Conceptual framework—reporting entity. The staff presented to the Boards a summary of the comments received on the Exposure Draft, Conceptual Framework for Financial Reporting: The Reporting Entity, whose comment period ended on July 16, 2010.
The Boards decided that:
- The staff has appropriately identified the issues to be discussed at future meetings.
- The staff should prepare a paper that discusses the possible time required to address these issues and the revised target issue date of the final chapter.
Financial instruments with characteristics of equity. The IASB and the FASB discussed how to proceed with the project.
The Boards acknowledged that they do not have the capacity currently to devote the time necessary to deliberate the project issues. Consequently, the Boards decided to not issue an Exposure Draft in the near term as originally planned.
The Boards will return to this project when they have the requisite capacity. This is expected to be after June 2011.
Other comprehensive income.The Boards discussed the comment letters received on their respective Exposure Drafts relating to the presentation of other comprehensive income.
The Boards instructed the staff to focus on the matter of whether entities should report profit or loss (net income) and other comprehensive income in one or two statements.
Financial statement presentation. At the October joint meeting, the staff updated the Boards on their outreach activities related to the July 2010 staff draft of an Exposure Draft on financial statement presentation. The Boards discussed how to proceed with the project.
The Boards acknowledged that they do not have the capacity currently to devote the time necessary to consider the information learned during outreach activities and modify their tentative decisions. Consequently, the Boards decided to not issue an Exposure Draft in the first quarter 2011 as originally planned.
The staff and Board advisors will meet with the project working group in December 2010 to discuss the cost and benefit information received during outreach activities and possible ways to move forward. The Boards will return to this project when they have the requisite capacity. This is expected to be after June 2011.