FASB UpdateWhat I’m CoveringSlide 3Additional Pension DisclosuresNew Disclosures for Public EntitiesSlide 6ExamplesMore to come on pensionsExchanges of Nonmonetary AssetsCommercial SubstanceSFAS No. 153, continuedChanges in Principles, Estimates, Entities & Corrections of ErrorsAccounting Changes & CorrectionsSFAS No. 154 - Accounting Changes and Error CorrectionsSome changes in principle = a change in estimateRestatement ExampleA simplification?Asset Retirement ObligationsDo we need to review FAS 143?Asset retirement obligationsARO ExamplesARO ExampleNew rules on redeemable preferred stockRedeemable financial instrumentsOther redeemable securitiesMeasurement of liabilityReporting on StatementsDisclosuresExample financial instrumentSlide 30New rules on guarantees of debtFIN45 Covers guarantee contracts that have any of the following 4 characteristicsCovers guarantee contracts that have any of the following 4 characteristicsTHE INTERPRETATIONKey point of FIN 45Measurement of obligationSlide 37The debit side is not prescribedDisclosures Required – FIN 45Disclosures Required – con’tExample from Recent F/SST Convergence with IASBSFAS No. 151 – Inventory CostsComing soonWhat’s Next?Forthcoming – first half 2006Slide 47Longer term projects1FASB UpdateFASB UpdateFor Acct 592 – Spring 20062 What I’m CoveringWhat I’m CoveringSome things we’ll talk about laterFIN 46 (Revised) – related to consolidations of special purpose entitiesSome standards relate to specialized industriesSFAS No. 147 – Acquisitions of Certain Financial Institutions (October 2002)These institutions are no longer excluded from coverage of FASB 141 and 142 and FASB 144SFAS No. 152 – Accounting for Real Estate Time-Sharing (December 2004)Amends SFAS Nos. 66 & 673 What I’m CoveringWhat I’m CoveringSome things are just too technical for in-depth coverage!SFAS No. 149 - Amendment of FAS 133 on Derivative Instruments and Hedging Activities (April 2003)Clarifies earlier standards and settle implementation issues particularly with respect to “embedded” derivativesSFAS No. 155 - Accounting for Certain Hybrid Financial Instruments (Feb 2006)Amends FAS 133 on derivatives and FAS 140 on securitization of certain derivatives4Additional Pension Additional Pension DisclosuresDisclosuresFAS 132 (revised 2003)5 New Disclosures for Public EntitiesNew Disclosures for Public EntitiesPercentage of total plan assets by categories like equity securities and debt securitiesMore detailed categories are encouraged if it would help assess risk and long-term expected rate of returnNarrative discussion of investment policies and strategiesNarrative discussion of how the expected rate of return was determinedAccumulated benefit obligation6 New Disclosures for Public EntitiesNew Disclosures for Public EntitiesBenefits expected to be paid to retirees in each of the next five years and in aggregate thereafter (presumably NOT the present value of benefits)Estimated employer contribution that will be made during next fiscal yearWeighted averages for assumptions in tabular formDiscount rates, rates of compensation increase, expected long-term rate of return, etc.Measurement dates used to determine PBO, etc.7 ExamplesExamplesAppendix C provides illustrations that should be useful in doing the footnote for the Peachbee project (Spring 2006)Illustration 1 is probably your “best bet”You should now be able to find “real examples” of the new disclosures since the rules were effective for fiscal years beginning after 12/15/038 More to come on pensionsMore to come on pensionsNovember 10, 2005, FASB decided to add a comprehensive project to its technical agenda on accounting for postretirement benefits including pensions and to conduct that project in two phases.Phase 1 (by 2nd half of 2006) Require that funded or unfunded status be recognized on blaance sheet (e.g., difference between PBO and Plan Assets for pensions)Phase 2 (multi-year project in collaboration with IASB)Comprehensively consider measurement & display of various elements of post-retirement benefits9Exchanges of Exchanges of Nonmonetary AssetsNonmonetary AssetsSFAS No. 153 – Exchanges of Nonmonetary Assets10 Commercial SubstanceCommercial SubstanceA nonmonetary exchange has commercial substance if the entity’s future cash flows are expected to significantly change as a result of the exchange. A significant change in future cash flows is defined to be meeting one or both of the following two conditions:1. Configuration of cash flows is differentThe configuration (risk, timing, and amount) of the future cash flows of the asset received differs significantly from the configuration of the future cash flows of the asset transferred.2. The entity-specific value is differentThe entity-specific value of the asset received differs from the entity specific value of the asset transferred, and the difference is significant in relation to the fair values of the assets exchanged.11 SFAS No. 153, continuedSFAS No. 153, continuedNonmonetary exchanges are recognized at the fair value of the nonmonetary asset relinquished UNLESS:1. Fair value is not determinable for either asset2. Exchange facilitates sales to customers. The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange.3. The exchange lacks commercial substance.12Changes in Principles, Changes in Principles, Estimates, Entities & Estimates, Entities & Corrections of ErrorsCorrections of ErrorsSFAS No. 154 - Accounting Changes and Error Corrections13 Accounting Changes & CorrectionsAccounting Changes & CorrectionsSFAS No. 154 discusses 3 types of accounting changes plus correction of errorsChanges in Accounting PrincipleChanges in Accounting EstimatesChanges in Reporting EntityErrors in Financial Statements14 SFAS No. 154 - Accounting SFAS No. 154 - Accounting Changes and Error CorrectionsChanges and Error CorrectionsIssued May 2005 – effective for fiscal years beginning after 12/15/2005Applies to VOLUNTARY changes in choice of accounting principleNo more cumulative effect of change in accounting standards at bottom of income statementAll changes in accounting principles would be handled through