FASB moves to simple majority vote; releases ED on derivatives; issues Statement 145. (accounting & auditing news).Following proposals to streamline its process, the Financial Accounting Foundation has decided to change the FASB's voting process from a supermajority Supermajority A corporate amendment in a company's charter requiring a large majority (anywhere from 67%-90%) of shareholders to approve important changes, such as a merger. to a simple majority vote. The decision received unanimous support by the FAF FAF abbr. financial aid form Trustees and was effective immediately. The Trustees also decided to retain a seven-member board. In other actions, the FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). has released an exposure draft, Amendment of Statement 133 on Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities. The ED amends Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to clarify the definition of a derivative. Comments on the proposal are due July 1. Also issued was FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No. 145, Rescission The abrogation of a contract, effective from its inception, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. By Agreement of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. The statement updates, clarifies and simplifies existing accounting pronouncements. Statement 145 rescinds Statement 4, which required all gains and losses from extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now be used to classify those gains and losses. Statement 64 amended Statement 4, and is no longer necessary because Statement 4 has been rescinded. Statement 44 was issued to establish accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. Because the transition has been completed, Statement 44 is no longer necessary. Statement 145 amends Statement 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This statement also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. To obtain a copy of the exposure draft or to order Statement 145, visit www.fasb.org. |
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