Conceptual Framework Phase D — Reporting Entity
The IASB staff presented its summary of comments received on the Discussion Paper The Reporting Entity. The session was essentially an educational one, and no decisions were made. The staff summary is available in Agenda Paper 4 for this meeting. The staff highlighted several of the high-level findings but did not discuss them to any extent.
There was considerable concern and interest among constituents and Board members about the cross-over between the concepts-level notions of control, joint control, etc and the related standards-level implementation issues. These were particularly acute given that the Board expects to issue draft standards-level guidance in the very near future.
Some Board members highlighted areas that interested them, supplemented by their own reading of the comments. In particular, one Board member noted that the comments on the notion of control in the context of not-for-profit entities intrigued him. Control in the profit-oriented sector was an exposure to variances in outcomes; but not-for-profits had a different objective. He urged the staff to consider this area some more before bringing proposals to the Board.
Other Board members were concerned that the Board needed to address to issues of entities under common control and the preparation of combined financial statements. These issues are of particular interest in the Asia-Pacific region. For example, it is common for banks in Korea to request combined financial statements in addition to IAS 27 consolidated statements.
The staff stated its intention to redeliberate the issues in the Discussion Paper at three Board meetings. These meetings would address:
- the description of a reporting entity; and consolidated and parent-only financial statements;
- the definition of control; the group reporting entity; and other control issues; and
- the entity perspective. This discussion would be conducted jointly with that for Phase A and would, among other things, decide where in the IASB Framework the discussion of the entity vs. proprietary/parent-company approach should be placed.