Thursday, January 22, 2009

FASB Meets Friday, To Consider Finalizing Disclosures FSP

If FASB is meeting, it must be Wednesday - no, wait - actually FASB has held a number of additional board meetings in recent weeks to address issues arising in the credit crisis. For example, on Monday Dec. 15 FASB voted to take certain actions relating to financial assets, including proposing an amendment of to certain impairment/other-than-temporary impairment (OTTI) guidance, which was proposed on Dec. 19 and finalized in January as FSP EITF 99-20.

Additionally, FASB voted on Dec. 15 to propose requiring additional disclosures, such as fair value and 'incurred loss' amounts, for a broad swath of financial assets; this was proposed on Dec. 24 in Proposed FSP FAS 107-a, Disclosures About Certain Financial Assets. Additionally, FASB voted to engage in certain medium-to-long term activities to improve reporting for financial instruments and financial assets.

As a result of releasing Proposed FSP FAS 107-a on disclosures about financial assets, FASB is slated to meet tomorrow (Friday Jan. 23) to consider comments received and vote on whether to issue that FSP as final. NOTE: As originally proposed, the effective date of the FSP, if finalized without change in the proposed effective date, would effectively be retroactive to 2008. That is one of the issues on which FASB specifically sought comment, in addition to other issues, in the proposed FSP.

There's no telling how FASB board members will vote tomorrow, but to get a flavor of the information they will be presented, here's the FASB staffs comment letter summary, which shows that about 3/4 of the over 60 comment letters received did not support the Proposed FSP. It can also be instructive to see what the staff's recommendation will be to the board, that recommendation is generally included in the board handout which is posted the day of the meeting and sometimes the evening before. However, reading the staff recommendation in a board handout can also be like reading tea leaves, for the board is not tied to the staff recommendation and reaches its own decision.

As noted in FASB's comment letter summary, significant concerns raised in the comment letters filed on Proposed FSP FAS 107-a related to the:
a. Overall Objective of the Proposed FSP
b. Scope
c. Disclosures
d. Effective Date and Transition

Private Cos
In addition to concerns voiced in comment letters about the general application of the FSP to all companies - public and private - a number of comment letters noted concern with respect to applicability to private company constituents. For example, the FASB staff comment letter summary cites the comment letter sent by the FASB-AICPA Private Companies Financial Reporting Committee (PCFRC), which said: “the financial reporting user representatives on the PCFRC do not believe that the proposed disclosures are needed to address any significant shortcomings in the information they utilize in making lending, investing, or bonding decisions.”

Additionally, the comment letter filed by FEI's Committee on Private Companies, Standards Subcommittee, (see FEI CPC letter) concurring with the letter filed by the AICPA Private Company Practice Section (PCPS) Technical Issues Committee (TIC), calling for an exemption for private companies, or a significantly deferred effective date. All of the comment letters have been posted by FASB here.

Other FASB News: Technical Corrections, Agenda Changes
At its regularly scheduled board meeting earlier this week, FASB voted to propose a group of technical corrections to various standards; the list appears in Wednesday's board handout, and further information is in FASB's Summary of Board Decisions.

As also noted in FASB's summary of its Jan. 21 meeting, FASB board chairman Robert Herz announced that FASB has dropped one project from its agenda and moved another project from its agenda to the EITF's agenda. Specifically, FASB has dropped the project on accounting for trading inventory, and move dthe project on in process R&D (IPR&D) acquired in an asset acquistion from its agenda to the EITF agenda.

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1 comment:

DougBarnert said...

The proposed amendments to IFRS 7 (largely equivalent to FSP-107a)were rejected due to overwhelming objection from preparers and mixed
opinions from users. Objections were to timing, the pro-forma nature, unsolved questions from the guidance and objections to the scope.

FASB staff said they heard the same feedback and expected the FASB to take the same action tomorrow, except that the requirement of interim
FV disclosures (which are now annual) will be discussed as an
alternative at the FASB.

There was a fair amount of disgust expressed by the IASB members with regard to the comments. They felt that the very same people who were
insisting that something be done quickly in this area turned around and rejected the board's solution.

Any further consideration of disclosures like these will be considered in the larger project to rewrite IFRS 7.
Douglas Wm. Barnert
Executive Director
Group of North American Insurance Enterprises