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Consolidation

Date recorded:

In the last step of the consolidation standard, the staff discussed with the Board various disclosure issues raised. One concern related to the disclosures for structured entities and why those disclosures were not required for risk exposure with all entities rather than just limited to structured entities. While the staff agreed with these disclosures could be relevant to all entities, including the disclosure requirement for all entities could involve expanding the scope of the standard and delay its issuance. The Board agreed to proceed with the disclosures only for the involvements with structured entities.

Another concern expressed was whether those disclosure requirements for structured entities was broader than those required under U.S. GAAP. The staff conducted a review of the proposed disclosure requirements with those in ASU 2009-17 (FAS 167) and outreach of U.S. constituents. The analysis determined that although there may be slight differences due to such definitions as "structured entities" versus "variable interest entities" or "involvements" versus "variable interests" the disclosure requirements are substantially similar and U.S. constituents generally agreed with the scope of the disclosures. The Board agreed to proceed with the disclosures as drafted.

In June 2010, the Board had agreed to include a disclosure objective requiring financial statements to include information that helps users understand the impact of noncontrolling interests on the entity. The staff has proposed to supplement the disclosure objective with specific disclosures similar to those exposed within ED 9 Joint Arrangements which includes the name of the subsidiary, their country of incorporation or residence, the method for allocating profit and loss and summarised financial information for the subsidiary (while considering a materiality threshold in preparation of these disclosures). The Board agreed with the staff's proposed disclosures.

The staff has also proposed additional disclosures for unconsolidated structured entities in which the reporting entity is the sponsor but no longer has continuing involvement as of the reporting date. In those instances, the reporting entity would disclose any income earned from its sponsorship and the carrying amount of any assets transferred to the structured entity during that period (carrying amount as of the time the transfer was made). The Board agreed with the staff's proposed disclosures.

The Board then voted for the staff to proceed with drafting in preparation for balloting of a final consolidation standard and a final disclosure standard (including disclosures for joint ventures, associates, etc.) and for drafting of an exposure draft on investment companies.

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