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Minutes Archive

Debt Disclosures, including Direct Borrowing


Minutes of Meetings, March 7–9, 2017

The Board continued deliberations addressing the proposed definition of debt for disclosure purposes. The Board tentatively agreed to amend the proposed working definition of debt for disclosure purposes as follows:
 
A contractual obligation to pay cash (or other assets that may be used in lieu of payment of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established.2

2For the purposes of this determination, interest to be accrued should not preclude that amount from being considered fixed.

The Board also discussed proposed disclosures related to direct borrowings. The Board tentatively agreed to propose requiring for direct borrowings, separately from other types of debt, disclosure of: the date of issuance, maturity date, amount borrowed, interest rates, information related to additional lines of credit extended, information related to collateral related to direct borrowings, and covenants and other remedies, including termination events and accelerated payment clauses. The Board tentatively agreed not to propose direct debt disclosures of: the direct debt lender, borrowing costs, and premiums paid. The Board also instructed the project staff to examine the proposed Securities and Exchange Commission amendments to Rule 15c2-12 and develop a definition of direct borrowings to differentiate them from public offerings.

Minutes of Meetings, January 17–19, 2017

The Board continued to discuss the definition of debt for disclosure purposes and tentatively decided that the “certainty of amount for repayment” should be incorporated into the working definition of debt. The Board also discussed incorporating the phrase “resulting from a borrowing or financing” into the working definition of debt for disclosure purposes and tentatively decided that the phrase should not be incorporated. The Board tentatively decided to add to the working definition of debt for disclosure purposes the phrase “one or more payments” to allow for the possibility that the debt could be satisfied with multiple payments. The Board tentatively decided to remove the phrase “on demand or on fixed or determinable dates” from the definition of debt for disclosure purposes. The Board also requested that the staff explore including the concept that the use of assets other than cash to settle the debt would not preclude a contractual obligation from being considered debt for disclosure purposes. The Board tentatively decided to move forward with the following working definition of debt for disclosure purposes:

A contractual obligation to pay cash, in one or more payments, to settle an amount that is fixed at the date the contractual obligation is established. For purposes of this determination, interest to be accrued should not preclude that amount from being considered fixed.

The Board then discussed issues related to disclosures for short-term debt related to (a) disclosures related to amounts and timing of resource flows and (b) disclosures related to compliance with short-term debt agreements. The Board tentatively decided to not require any additional disclosures related to short-term debt.

Minutes of Meetings, December 5–8, 2016

The Board continued discussing the working definition of debt for disclosure purposes. The Board considered whether common liabilities found by staff in annual financial reports could meet the working definition of debt for disclosure purposes. For liabilities meeting the definition, the Board discussed whether they should be proposed to be exempted from disclosure requirements in notes to the financial statements.

The Board tentatively agreed that bonds, notes, and loans payable meet the proposed working definition of debt and should not be proposed to be excluded from disclosures related to debt. The Board tentatively agreed that some prizes payable from lottery activities meet the proposed working definition of debt and should not be proposed to be excluded from disclosures related to debt.

The Board tentatively agreed that the following liabilities meet the proposed working definition of debt but tentatively agreed to propose that they be excluded from the scope of the project: (a) compensated absences, (b) termination benefits, (c) nonexchange financial guarantees, and (d) prepaid tuition obligations. In addition, the Board tentatively agreed that some claims and judgments meet the proposed working definition of debt but tentatively agreed to propose that they be excluded from the scope of the project.

The Board tentatively agreed that pollution remediation obligations, landfill closure and postclosure costs, and asset retirement obligations do not meet the working definition of debt and subsequently do not require exclusion.

Minutes of Meetings, October 25–27, 2016

The Board began deliberations by discussing a working definition of debt for disclosure purposes. The Board tentatively agreed that the definition of debt for disclosure purposes should be “a contractual obligation to pay cash on demand or on fixed or determinable dates.”

The Board tentatively decided to provide exceptions to this definition in the scope of the proposed guidance rather than in the definition itself. The Board also tentatively agreed to the following scope exceptions: (1) derivative instruments, (2) leases, (3) postemployment benefits, and (4) trade accounts payable. The Board also directed the staff to look at additional liabilities that may unintentionally meet the tentative definition of debt for disclosure purposes and require exclusion.

 
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