4/30/2008 - Final FSP No. Fas 142-3 Addresses Useful Life of Intangible Assets
The Financial Accounting Standards Board issued Final FASB Staff Position (FSP) No. FAS 142-3, Determination of the Useful Life of Intangible Assets, on April 25, 2008.

The guidance is intended to improve the consistency between the useful life of a recognized intangible asset under Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R), Business Combinations, and other guidance under U.S. generally accepted accounting principles (GAAP).

The Board has noted that the useful life of a recognized intangible asset in SFAS No. 142 is typically much shorter from the period of expected cash flows used to measure the fair value of the asset in a business combination when the underlying arrangement includes renewal or extension terms, such as a phone contract. Board members also had acknowledged that the difference between the useful life of an intangible assets and the cash flow periods use to measure fair value was especially pronounced for longer-lived intangible assets for which the likelihood of renewal or extension is high, but for which the underlying arrangement requires material modifications.

The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Early adoption is prohibited, the FASB said. Paragraph 11(d) of SFAS No. 142 requires entities to base assumptions for determining the useful life of a recognized intangible asset on the legal, regulatory, or contractual provisions that permit extending the asset's useful life without appreciably adding to its cost.

4/29/2008 -- In Final FSP SOP No. 90-7-1, the FASB Amends Early Adoption Guidance for Companies Emerging from Bankruptcy
The April 24, 2008, issuance of Final FASB Staff Position (FSP) SOP No. 90-7-1, An Amendment of AICPA Statement of Position 90-7, by the Financial Accounting Standards Board resolves a conflict concerning the early adoption of new guidance by entities emerging from bankruptcy.

The guidance is effective for all financial statements issued following its release.

The American Institute of Certified Public Accountants' (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, which was issued in 1990, required early adoption of new accounting standards for entities adopting fresh-start reporting as they emerge from bankruptcy.

Guidance issued by the FASB in the years since 1990 has tended to prohibit early adoption. The result was an ungainly situation in which companies recovering from bankruptcy were required to be the first to implement new standards. The members of the FASB agreed that it was more appropriate to amend (SOP) 90-7, than to continue to encourage entities still struggling financially to adopt provisions that were not required of other, more stable companies.

To resolve this inconsistency, the Board amended the guidance so that entities emerging from bankruptcy are not allowed to early adopt an accounting principle when early adoption is not permitted by that accounting standard.

4/21/08-Board Seeks to Set Clear Path for Credit Default Swaps Project
During an education session following their regular weekly meeting on April 16, 2008, the members of the Financial Accounting Standards Board struggled to reach a clear consensus with the standards-setting body's research staff on the scope and the proper approach for a project on credit default swaps.

The staff proposed a narrowly focused amendment to FASB Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others-an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. While Board members agreed that disclosures for credit defaults swaps are needed, they differed on the standard that should be amended. Some Board members seemed reluctant to take on another narrowly focused derivatives disclosure project so soon after the March 19 issuance of the FASB's Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133.

"I look at this, and what I really come out with is, what is wrong with our derivatives disclosure that we need a special project for credit derivatives?" asked Donald Young. "Maybe we've got some issues in our approach."

Some members favored drafting broader guidance that would expand the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to encompass credit default swaps.

Chairman Robert Herz said he wanted the project to produce amended guidance that subjects all credit derivatives to disclosure.

"Once we scope it that way, whether a credit derivative meets the definition of a 133 derivative or not, will there still be the same disclosure?" he asked. Staff members noted that the derivative instruments that are eligible for the scope exception under SFAS No. 133, tend to fall under FIN No. 45. The staff wants the project to focus on credit derivatives that have similar characteristics to the financial products governed by FIN No. 45 but do not fall under its scope. They believe the adjustment would make hedging disclosures more informative for financial statement users.

"We are not trying to identify products by name, but we have certain definitional types of things," said a staff member in response to questions about whether the project will encompass the full range of derivative products. "Hopefully we are capturing everything."

4/17/08 - Internal Draft Document for Financial Statement Presentation Project Nears Completion
The research staff of the Financial Accounting Standards Board (FASB) is nearing completion of an internal draft of a proposal for the overhaul of financial statement presentation, according to a project update on the FASB's website.

The internal document should be ready for review by the FASB, the Accounting Standards Board of Japan (ASBJ), and the International Accounting Standards Board (IASB), in May 2008. The schedule includes releasing a version of the proposal for public comment in the third quarter.

Each of the three standard setting bodies plans to separately develop their own proposals for each issue in this document and vote on them, and at the same time resolve the differences with the other Boards.

The scope of the FASB financial statement presentation draft will cover the first two phases of the project. The first phase includes what constitutes a complete set of financial statements and the requirements for presenting comparative financial information. The second phase includes principles for aggregating and disaggregating information in each financial statement, defining certain totals and subtotals to be reported and certain decisions on the use of other comprehensive income and cash flow statements.

The intended goal is a common, high-quality standard for presentation of information in financial statements that will provide financial statement users with more useful and relevant financial information, particularly in relation to understanding how operating, financing, and investment activities have caused an entity's financial position to change and the components of those changes.

4/14/08 - Fair Value Hierarchy Provides Challenge for Proposal on Pricing Liabilities
The seven members of the Financial Accounting Standards Board struggled to resolve some sharp differences on the fair value hierarchy at their April 9, 2008, weekly meeting at the Board's Norwalk, CT, headquarters.

The Board members considered modifying the Proposed FASB Staff Position (FSP) No. FAS 157-c, Measuring Liabilities under FASB Statement No. 157, to include more specific guidance on the fair value hierarchy than is provided in Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurement.

But Board members disagreed over new language that the staff added to Proposed FSP No. FAS 157-c on measuring liabilities at fair value if observable inputs were available. The new language specifies that the guidance from paragraph 7 of the proposed FSP should only be used if significant unobservable (Level 3) inputs are used in the fair value measurement. This language had not been in the Proposed document when it was released in January, but was offered by the staff in response to the many comments received.

The Board also approved the recommendation of the staff not to make any further changes to the proposal on other issues constituents raised in comment letters, including realization of a liability, nonperformance risk, scope, the bid/ask spread, blockage of a liability, and disclosures.

The staff is preparing an amended version of the proposed FSP that will be submitted to the Board.

FASB Chairman Robert Herz argued that the staff proposal on measuring unobservable inputs constituted an exception to the fair value principles in SFAS No. 157. While he understood the logic behind the proposal, he wanted it described as a practical expedient in the final FSP.

4/09/08 - Convergence Project May Determine Fate of FIN No. 48.
Because convergence of international accounting standards is still one of the top priorities for the Financial Accounting Standards Board (FASB), the standard setter's plans for income tax accounting may throw a curveball to accounting professionals just getting used to FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes.

Speaking during the 58th midyear Conference of the Tax Executives Institute (TEI) on April 7 in Washington, DC, Allen Shoulders, Director of Tax Internal Control Services for Ernst & Young in Dallas, said people are waiting for an answer on the fate of FIN No. 48.

"There's talk we'll adopt one or the other," said Shoulders, referring to the FASB's Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, and two pieces of guidance from the International Accounting Standards Board (IASB), International Accounting Standard (IAS) 12, Income Taxes, and IAS 37, Provisions, Contingent Liabilities and Contingent Assets. "The concept of convergence is on its way, the challenge is going to be finding something that U.S. auditors can hang their hat on."

4/07/08-Qualified Special Purpose Entities Will Be Removed From SFAS No. 140.
The Financial Accounting Standards Board approved amending Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, to remove the qualified special purpose entity concept from the derecognition language in paragraph 9 of the statement during a lengthy, contentious, and unusually well attended meeting at its Norwalk, CT headquarters, on April 2, 2008.

Under SFAS No. 140, certain off-balance-sheet arrangements can be considered QSPEs if they meet requirements established in the aftermath of the Enron scandal. The statement was part of a broad attempt to provide a clearer picture of the relationship between sponsoring companies and their off-balance-sheet entities.

The planned amendments to SFAS No. 140 will be included by the staff in a draft document and exposed for public comment in the near future.

Board members agreed that with the dizzying growth of derivatives and the sophisticated, and often confusing, extent to which assets are securitized, that SFAS No. 140's treatment of QSPEs was no longer helpful to financial statement users.

3/31/08 - FASB Will Issue Exposure Draft for Project on Discontinued Operations.
The Financial Accounting Standards Board plans to move ahead on proposed guidance for discontinued operations, according to a March 27, 2008, update on its website.

The Board will meet in the second quarter to review the tentative decisions that have been made on the project since a January 24, 2007, meeting, when the Board agreed to a revised definition of a discontinued operation and the disclosures that would be required when reporting a component of an entity that was or will be disposed of.

The Board also plan to discuss the remaining issues that need to be addressed prior to the staff's preparation of an exposure draft, which is scheduled to be released in the second quarter of 2008.

The discontinued operations project was separated from the financial statement presentation project in April 2007, when the Board decided this topic would not be completed in time to be included in a draft preliminary views document on statement presentation.

3/4/08 -- PROPOSED FSP NO. SOP 90-7-a ADDRESSES EARLY ADOPTION OF NEW STANDARDS FOR ENTITIES COMING OUT OF BANKRUPTCY.
The Financial Accounting Standards Board issued proposed FASB Staff Position (FSP) No. SOP 90-7-a, An Amendment of AICPA Statement of Position 90-7, on February 27, 2008. If approved, the draft guidance would nullify the requirement in paragraph 38 of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, regarding changes in accounting principles. FASB asked constituents to submit comments by March 28. Proposed FSP No. SOP 90-7-a would amend paragraph 38 of SOP 90-7 by inserting a statement requiring that the reorganization value of an entity be "assigned to the entity's assets and liabilities in conformity with the procedures specified by FASB Statement of Financial Accounting Standards (SFAS) No. 141(R), Business Combinations. If any portion of the reorganization value cannot be attributed to specific tangible or identified intangible assets of the emerging entity, such amounts should be reported as goodwill in accordance with paragraph 6 of SFAS No. 142, Goodwill and Other Intangible Assets." The proposed guidance also calls for deferred taxes to be recognized in accordance with U.S. generally accepted accounting principles (GAAP).

2/27/08 -- FASB to Consider Additional Disclosures in Accounting for Contingencies.
When the Financial Accounting Standards Board meets for an educational session on February 27, 2008, it plans to discuss the application of fair value accounting to Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies.

The Board's interest in the issue comes as many preparers and users of financial reports are expressing their frustration with the delayed recognition of assets and liabilities that has occurred from SFAS No. 5 with respect to loss contingencies.

SFAS No. 5 requires that a loss be probable and estimable before it is recorded, but the concern has been expressed that the recognition of a liability occurs long after an event has occurred, such as the filing of a lawsuit. As a result, financial statements may lack significant information.

The SFAS No. 5 project was undertaken in September 2007 and has yet to reach its first public discussion by the Board, but several major public companies are on the record as opposing the application of fair value measurements for contingencies related to litigation from high-profile public constituents.

2/25/08 -- FASB Issues Final FSP No. FAS 140-3 for Transfers and Servicing of Financial Assets.
The Financial Accounting Standards Board issued FASB Staff Position (FSP) No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, on February 20, 2008. The FSP presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement as described in FASB Statement of Financial Accounting Standards (SFAS) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, unless four conditions are all met.

The conditions are:

• The initial transfer and the repurchase financing are not contractually contingent on one another,
• The repurchase financing provides the initial transferor with recourse to the initial transferee upon default,
• The financial asset subject to the initial transfer and repurchase financing is readily obtainable in the marketplace, and
• The repurchase agreement matures before the asset.

Transactions that meet all four criteria will be accounted for separately from repurchase financings. The FASB also said that the initial trades should be evaluated to determine if they meet the requirements for sale accounting under SFAS No. 140 without taking into consideration the repurchase financing.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after November 15, 2008.

2/20/08 -- FINAL FASB STAFF POSITION (FSP) NO. SOP 07-1-1 DELAYS EFFECTIVE DATE OF THE AICPA'S SOP 07-1.
The Financial Accounting Standards Board issued Final FASB Staff Position (FSP) No. SOP 07-1-1, Effective Date of AICPA Statement of Position 07-1, on February 14, 2008. The guidance delays indefinitely the implementation of the American Institute of Certified Public Accountants’ Statement of Position (SOP) 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.

The FASB said the delay allows it time to consider issues relating to the implementation of the AICIPA statement.

The Final FSP is effective retroactively to December 15, 2007, the original date when SOP 07-1 was to become effective. The FASB said that entities that early adopted SOP 07-1 may continue to apply it, but are not required to do so. An entity that has not early adopted the guidance can only apply its provisions if a parent company was an early adopter and is continuing to follow the statement.

The FASB said FSP No. SOP 07-1-1 does not amend FSP No. FIN 46(R)-7, Application of FASB Interpretation No. 46(R) to Investment Companies, which will be effective only upon initial adoption of SOP 07-1. In addition, Emerging Issues Task Force (EITF) Issue 85-12, “Retention of Specialized Accounting for Investments in Consolidation,” and EITF Topic D-74, “Issues Concerning the Scope of the AICPA Guide on Investment Companies,” remain effective for entities that have not adopted SOP 07-1.

2/19/08 -- FASB Votes to Amend AICPA SOP 90-7 and Remove Early Adoption Provision.

At its weekly meeting on February 13, 2008, the Financial Accounting Standards Board voted 5-2 to add a project to its agenda for the purpose of removing the requirement that entities emerging from bankruptcy and applying fresh-start reporting to early adopt new standards. To accomplish the change, the Board instructed the staff to draft a proposed amendment to the American Institute of Certified Public Accountants' (AICPA) Statement of Position (SOP) 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.

The proposed amendments will be issued with the FASB's standard 30-day comment period.

SOP 90-7 provides guidance for entities that have filed petitions with a Bankruptcy Court and expect to reorganize as a going concern under Chapter 11. The statement requires entities adopting fresh-start reporting to adopt any changes in accounting standards within the 12 months following the date that they started using the fresh-start reporting.

The project addresses the conflict that had arisen between SOP 90-7 and other authoritative accounting standards. When SOP 90-7 was issued in 1990, it was common for early adoption to be required. Standards issued in more recent years typically prohibited early adoption, which led to a conflict with SOP 90-7.