SBD 03-10-10


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.

March 10, 2010 Board Meeting

Accounting for financial instruments: hedge accounting. The Board discussed the hedge accounting model that will be included in the guidance in the comprehensive proposed FASB Accounting Standards Update to be issued under this project.

The Board decided that the hedge accounting model would incorporate all changes to current hedge accounting proposed in the June 2008 FASB Exposure Draft, Accounting for Hedging Activities, except that the proposed Update would retain hedging of risk components (bifurcation-by-risk), which the Exposure Draft proposed to eliminate.

Entities that qualify for the delayed effective date for certain aspects of the classification and measurement guidance would also apply the hedge accounting model in the proposed Update.

Financial statement presentation. The FASB and the IASB are conducting this joint project in phases. The IASB finalized certain changes to its presentation standard (IAS 1, Presentation of Financial Statements) in 2007. Those changes include requiring that:
  1. A complete set of financial statements comprise:
    1. A statement of financial position as at the end of the period
    2. A statement of comprehensive income for the period
    3. A statement of changes in equity for the period
    4. A statement of cash flows for the period
    5. Notes, comprising a summary of significant accounting policies and other explanatory information
    6. A statement of financial position as at the beginning of the earliest comparative period when a reporting entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.
  2. An entity present with equal prominence all of the financial statements in a complete set of financial statements.
  3. An entity present comparative information in respect of the previous period for all amounts reported in the current period’s financial statements.
The Board had previously agreed with all those requirements except (f). In their prior discussions, both Boards had agreed that a statement of financial position as at the beginning of the period should always be presented as part of a complete set of financial statements. In finalizing the changes to IAS 1 in 2007, the IASB decided that a statement of financial position as at the beginning of the earliest comparative period should only be presented in certain circumstances (as described in (f) above). The Board agreed to make a similar change. With that modification, the Board affirmed the inclusion of the above requirements in its Exposure Draft on financial statement presentation planned for issuance in April 2010. Those requirements would not override the SEC’s requirements for presenting comparative information as set forth in Regulation S-X.

The Board also affirmed its prior tentative decision that an entity should not present the effects of extraordinary, unusual, and infrequently occurring events and transactions as a functional category in the statement of comprehensive income as currently required under FASB Accounting Standards Codification™ Subtopic 225-20, Income Statement—Extraordinary and Unusual Items (originally issued as APB Opinion No. 30).

The Board decided that only the following paragraphs from IAS 1 should be included in the FASB’s forthcoming Exposure Draft (modified as necessary to be consistent with U.S. GAAP and to be consistent with decisions made in this project):
  1. Frequency of reporting (paragraphs 36 and 37, except the first sentence in paragraph 36)
  2. Comparative information (paragraphs 40–44)
  3. Materiality (paragraphs 29–31)
  4. Consistency of presentation (paragraphs 45 and 46)
  5. Information about share capital (paragraphs 79 and 80)
  6. Disclosure of the measurement basis or bases used in preparing the financial statements in the summary of significant accounting policies (paragraphs 117(a) and 118).
As a result of those decisions, the FASB’s Exposure Draft will not include the following IAS 1 paragraphs:
  1. Fair presentation (paragraphs 15–24)
  2. Going concern (paragraphs 25 and 26)
  3. Accrual basis of accounting (paragraphs 27 and 28)
  4. Structure of the notes to financial statements (paragraphs 112–116)
  5. Disclosure of estimation uncertainty (paragraphs 126–133)
  6. Capital disclosures (paragraphs 134–136)
  7. Other disclosures (paragraphs 136A, 137, and 138).

Agenda decision announcements. The FASB chairman announced that he added the following projects to the Board’s agenda:
  1. Investments properties. The Board will consider whether entities should be given the option (or be required) to measure an investment property at fair value through earnings. Existing international financial reporting standards (IAS 40, Investment Properties) provides such an option. This project also will consider how an entity should consider a lease when measuring the fair value of a leased investment property.

    As part of this project, the Board also may address related issues that are within the scope of EITF Issue No. 09-D, “Application of Topic 946, Financial Services—Investment Companies, by Real Estate Investment Companies.” As a result, the EITF will not discuss Issue 09-D at its March 18, 2010 meeting.
  2. Balance sheet—offsetting. The Board will reconsider the current criteria that determine when an entity may offset assets and liabilities and report them as a net amount in the statement of financial position.
The FASB chairman also announced that he added the following issue to the EITF’s agenda:

Accounting for multiple foreign currency exchange rates. The current economic situation in Venezuela has raised questions about the usefulness of information that results from applying existing foreign currency standards in economies that have multiple exchange rates. The EITF will reconsider whether it is appropriate to use different exchange rates in an economy with multiple exchange rates (such as a parallel rate and an official rate) for (1) remeasurement of a foreign-currency-denominated transaction and (2) translation of a foreign subsidiary’s financial statements.

While the current situation in Venezuela highlights the reporting problem, the EITF will not limit its discussion to foreign currency transactions involving that country.