FASB Retains November Effective Date For Disclosures Of Credit Derivatives, Other Guarantees

FASB voted earlier today (Aug. 6) to retain the effective date stated in its proposed FASB Staff Position (FSP) No. FAS 133-b and FIN 45-c, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45. (Proposed FSP, comment letters.) That proposed effective date is fiscal years and interim periods ending after Nov. 15, 2008.
The board noted some commenters on the proposed FSP had requested that FASB delay the effective date of the upcoming final FSP to coincide with the effective date of FAS 161 on derivatives disclosures; however, FASB voted to retain the original effective date, as noted above, due to strong investor interest in getting timely information on Credit Default Swaps and certain other guarantees. The vote was 3-2, with FASB Chairman Robert Herz and FASB Board Members Tom Linsmeier and Larry Smith voting to retain the effective date; and FASB Board Members Leslie Seidman and George Batavick voting to defer the effective date.
FASB will also clarify in the final FSP that interim disclosure information pertaining to companies’ fourth quarter will be required to be provided under this FSP as well as under FAS 161. Staff noted they received some questions whether 4th quarter disclosures would be required, since companies don’t file a 4th quarter “interim” report (e.g. for public companies, a 10-Q) per se, but file only an annual report (10-K) at year end. The clarification to be provided in the FSP will note that disclosures required by FAS 161 and by this FSP will need to be provided for 4th quarter as well (e.g. to be included in 10-K). The likely language for this clarification is noted in para. 10 of today’s board handout.
The board authorized the staff to proceed in drafting a pre-ballot draft of the FSP.
FASB staff member Bob Bhave said he would expect to have the final FSP ready for release (following board vote on ballot draft) in mid- to late-September. Board member Larry Smith said “I would encourage staff move as quickly as possible considering the decision just made” [i.e. on retaining the effective date].
Additional highlights from today’s FASB meeting can be found in this FEI summary (FEI members only).

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