Discontinued Operations - FASB's Recent Discussion

FASB met recently and decided that discontinued operations should continue to be presented in a separate section on the face of an entity’s financial statements. Now the Board must tackle the task of defining a discontinued operation, around which there has been some confusion. New guidence should include qualitative indicators of significance as part of the definition.

FASB Board Discusses Contracts with Customers and Revenue Recognition

Recently the FASB Board met to discuss various issues including those related to the presentation of contracts with customers. Those issues include:

1. When, if ever, an entity should present contractual rights and obligations as assets and liabilities, respectively.

2. Whether an entity should present net contract assets separately from net contract liabilities.

3. Whether and how an entity should present short-term contracts separately from long-term contracts.

4. The relationship between an entity’s contract position and accounts receivable.

The Board did not reach any decisions and indicated that further analysis was necessary and should be presented at the next board meeting.

Loss Mitigation and Conflict of Interest - FFIEC Guidence

The Federal Financial Institutions Examination Council (FFIEC) is concerned about responsible loss mitigation activities and the preservation of homeownership. On August 6th, the FFIEC issued a statement which outlines the key duties and responsibilities of loan servicers in situations where there is a 1st and 2nd lien and the decision to modify might be influenced by a conflict of interest. The basic, but firmly worded, guidance indicates that decisions that are not anticipated to produce a greater recovery to investors given the alternatives may constitute a breach of that duty.

Fannie Mae Releases Economic Projections

Fannie Mae recently looked into its crystal ball to forecast where we might be headed in this economic crisis. The really good news is that GDP is projected to start climbing into positive territory beginning in 3Q09 with 0.8% growth. Contrast this with a negative 5.5% decline in 1Q09. This growth continues throughout 2010 reaching 3.3% GDP by 4Q10.

Expect unemployment to stabilize, albeit at a high level, at around 9.8%, through 2010. Despite all the dollars being pumped into the economy, expect inflation to be at a modest 1.5%. Business inventories continue to get leaner, until 4Q10, when some growth is seen at that time showing 5.5% growth.

An encouraging sign is the growth of business fixed investment which starts to increase as soon as 3Q09.

Expect the Fed Funds rate to remain low at around 24bps throughout 2010.