FASB Discusses Fair Value Measurement,

Business Combinations

At its board meeting on January 25, the Financial Accounting Standards Board (FASB or the board) discussed how it will proceed toward drafting of a final Fair Value Measurement (FVM) standard, and also discussed proceeding toward final standards on Business Combinations and Noncontrolling Interests (collectively referred to as Business Combinations).

Fair Value Measurement (FVM) Standard to Have One Effective Date
The board tentatively agreed there should be a single effective date for the FVM standard, rather than bifurcating the initial effective date as was done in the Exposure Draft (which had an accelerated effective date for disclosures).

The effective date agreed to at today's board meeting for the FVM standard was set as fiscal years beginning after Nov. 15, 2006, and interim periods included therein.

One board member suggested that the final standard emphasize that related disclosures during the fiscal year in which the final standard becomes effective would pertain to quarterly (10-Q) and not just year-end (10-K) disclosures.

The board also reached a tentative consensus that they would defer issuance of a final FVM standard until after they substantially complete redeliberation of proposed FSP FAS 133-a. FASB staff said they hope to have completed both the final FVM standard and the final FSP by the end of the second quarter, 2006, and any decision to reexpose the FVM standard would be made later in the process after the documents and related deliberations are further along.

Substantive matters also discussed at today's board meeting related to the Fair Value Hierarchy in the proposed FVM standard, and disclosures required, as detailed on pages 3-5 of the board handout. A summary of FASB’s decisions on substantive matters relating to FVM at its January 25 meeting is available here.

Business Combinations Final Standards Not Likely until 2007, Say FASB Staff
Another topic discussed at the FASB board meeting on January 25 was Business Combinations.

FASB staff noted that, as a practical matter, that final standards on Business Combinations were not likely to be issued until the first half of 2007; thus, the effective date of the final standards was not likely to be January 1, 2007 (technically, fiscal years beginning after December 15, 2006) as originally proposed.

The purpose of the discussion at today's board meeting regarding Business Combinations was to get the board's agreement on the staff's planned approach to proceeding with drafting the final standards; specific technical issues on Business Combinations were not debated during this meeting.

A summary of comment letters received on the Business Combination Exposure drafts was included in the board handout, along with a list of guiding principles suggested by the staff to guide them in drafting the final documents. (There was some debate about the principles during the meeting.)

Prepared Jan. 25, 2006 by Edith Orenstein (eorenstein@fei.org), Director, Technical Policy Analysis, Financial Executives International (FEI) based on listening to the webcast of the FASB meeting. This summary does not represent FEI opinion, unless specifically noted above.