In conjunction with their 30 June 2005 proposals to amend IFRS 3 and SFAS 141 (see story above), the IASB and the FASB also published exposure drafts proposing that non-controlling interests should be classified as equity within the consolidated financial statements and that the acquisition of non-controlling interests should be accounted for as an equity transaction. The IASB's proposals are presented as amendments to IAS 27. Our response states:
- Our comment letter on the IASB's June 2005 proposed amendments to IFRS 3 does not support the adoption of the proposed amendments. Consequently, we do not support the majority of this Exposure Draft's proposed changes to the accounting and reporting of non-controlling interests.
- The Board's conclusion that transactions between controlling and non-controlling shareholders should be accounted for as equity transactions is premature and should be deferred until completion of the IASB's and FASB's joint Conceptual Framework project. We are not yet convinced that the single economic entity view of consolidated financial statements provides the most relevant information to financial statement users.
- Neither IAS 27 as currently adopted nor as proposed to be amended provides guidance on accounting for changes in a parent's ownership that do not result in loss of control. As a result, preparers of financial statements apply differing accounting treatments as accounting policy elections, reducing comparability. Indeed, in practice, we have seen the application of at least five different methods of accounting for increases in ownership interest after control has been obtained.
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