At its March 12, 2008, meeting, the Emerging Issues Task Force (EITF) reached tentative conclusions on three EITF Issues, which are summarized as follows:
- EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock"
FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, specifies that a contract (that would otherwise meet the definition of a derivative under that Statement) issued or held by the reporting entity that is both indexed to its own stock and classified in stockholders' equity in its statement of financial position should not be considered a derivative financial instrument for purposes of applying that Statement. Issue No. 07-5 provides tentative guidance for determining whether an equity-linked financial instrument (or an embedded feature) is indexed to an entity's own stock, using a two-step approach. First, the instrument's contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument's settlement provisions. If finalized, the guidance in this Issue would be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
- EITF Issue No. 08-3, "Accounting by Lessees for Nonrefundable Maintenance Deposits"
Certain lease agreements include provisions requiring the lessee to make deposits with the lessor to financially protect the lessor if the lessee does not properly maintain the leased asset. This Issue addresses whether lessees should account for nonrefundable maintenance deposits as a deposit or as contingent rental expense, and tentatively concludes that nonrefundable maintenance deposits should be accounted for as a deposit asset. The scope of this Issue is limited to nonrefundable maintenance deposits paid by a lessee under an arrangement accounted for as a lease. If finalized, this Issue would be effective for fiscal years beginning after December 15, 2008, including interim periods within those fiscal years.
- EITF Issue No. 08-4, "Transition Guidance for Conforming Changes to Issue No. 98-5, 'Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios'"
The objective of this Issue is to provide transition guidance for conforming changes made to Issue No. 98-5 that resulted from Issue No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments," and FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This transition guidance is unique in that the current changes reflect matters that should have been addressed in the past, but were missed. Issue No. 08-4 tentatively concludes that conforming changes made to Issue No. 98-5 that result from Issue No. 00-27 and Statement No. 150 will be effective for financial statements issued for fiscal years ending after December 15, 2008.
Also, at the March EITF meeting the SEC Observer announced that revisions to EITF Topic No. D-98, "Classification and Measurement of Redeemable Securities," were made to include the SEC staff's views regarding the interaction between Topic D-98 and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. Minutes of the March 12, 2008 EITF meeting are available at http://www.fasb.org/eitf/03-12-08_mtg_minutes.pdf. |
