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FASB Discusses Comments Received on the Proposed Amendments to Statement 167

Published on: 21 Jan 2010

At the FASB’s Education Session today, the Board discussed the comment letters received on the Exposure Draft to defer Statement 167 for a reporting entity’s interest in certain entities and amend how a decision maker or service provider determines whether its fee is a variable interest (paragraph B22). The Board did not vote on these matters; however, the Board plans to discuss these issues next week. Final staff recommendations (and Board vote) may change.

The FASB received 38 comment letters, primarily from financial institution preparers and accounting firms/organizations. Nearly all supported the deferral and the majority of respondents supported the related party guidance in paragraph B22 as well as clarifying that a quantitative analysis is not the sole determinant under paragraph B22(c).

The discussion primarily focused on the scope of the deferral. Several Board members expressed concern that respondents were focusing on the types of entities that may meet the deferral rather than the characteristics that would qualify the entity for the deferral. The staff indicated that they would be recommending language to clarify that the list of entities that might possess the characteristics for deferral is not all inclusive and is not definitive. Rather, all facts and circumstances should be considered in determining whether the entity possess the characteristics for deferral. Different types of entities were discussed further, including CDOs, Limited Partnerships, foreign entities, stable value funds, and various government programs. For these types of entities, the discussion focused on the facts and circumstances around the specific entity and implied that the structure alone would not be conclusive. Further, the Staff will not be recommending the final ASU further define securitization or asset backed financing.

As it relates to guidance on claw backs and capital calls, at least 2 Board members suggested further discussion was needed on these topics.

With regards to the related party guidance in paragraph B22, the Staff expressed the view that an entity’s related parties should be considered as it they were its own interest and that the amendments to B22 were not intended to change the related party evaluation.

Finally, the Board discussed when an entity qualifies for the deferral but, in a subsequent period, no longer qualifies (for example, if they provide a guarantee in a subsequent period). In this scenario, at least one Board member implied the entity would apply ASC 805 (Statement 141R) when consolidating the entity (if it qualifies as a business).

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