At its May 31, 2006 board meeting, the Financial Accounting Standards Board (FASB or the board), after considering comments received on its proposed FASB Staff Position (FSP) No. FAS 142-d, "Amortization and Impairment of Acquired Renewable Intangible Assets," voted to abandon the proposed FSP. Prior to that vote, board members indicated their belief that implicit renewals were within the scope of the proposed FSP.

Majority Vote to Abandon Proposed FSP
As noted in the board handout summarizing comment letters on the proposed FSP, a "significant majority" of comment letters stated that the methodology in the proposed FSP was contrary to FASB's goal of reducing complexity, and that "the cost and complexity of creating a new class of finite-lived renewable intangibles far exceeded any likely benefits." [NOTE: The comment letter filed by FEI's Committee on Corporate Reporting (CCR) is available here.]

After considering comments, a majority of FASB board members voted to abandon the methodology in the proposed FSP.

However, in deciding whether to proceed with various alternate methodologies or abandon the proposed FSP altogether, the board was initially deadlocked. Following further discussion, one board member changed their vote, resulting in a majority of the board voting to abandon the proposed FSP.

Implicit Renewals Within Scope of Proposed FSP
Prior to the vote to the board's vote to abandon the project altogether, the board discussed whether implicit as well as explicit renewal provisions were within the scope of the proposed FSP and related literature.

According to the board handout, "a majority of respondents questioned whether the scope of the proposed FSP includes intangible assets with implicit renewal provisions, such as customer relationships or is intended to apply only to intangible assets with explicit renewal provisions."

The board voted that implicit as well as explicit renewal provisions were within the scope of the proposed FSP.

Included as part of this discussion was whether or not implicit renewables were within the scope of paragraph 11(d) of FAS 142. It was not clear from the discussion if the board took a position on that.

Other topics discussed
Additional topics scheduled to be discussed at the May 23 FASB board meeting, as described in the board handout, included certain possible exceptions for the FASB's and International Accounting Standards Board's (IASB's) joint Exposure Draft, "Business Combinations," and whether to issue a proposed FSP to clarify the classification guidance in FSP FAS 123(R)-1, "Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R), "Accounting for Share-Based Payments."

Further information
Reference should be made to the official minutes of the FASB board meeting when posted. Additional information will also be available in FASB's weekly Action Alert

Proposed FSP on Planned Major Maintenance Activities Released; 60 Day Comment Period
Separately, also on May 31, the FASB released Proposed FSP No. AUG-AIR-a, "Accounting for Planned Major Maintenance Activities." The proposed FSP would prohibit the accrue-in-advance method for planned major maintenance activities, and would apply to all industries. The 60 day comment period ends July 31. Further information is available here.

Prepared May 31, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.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.