The IASB staff updated the Board on decisions made by the FASB at its recent meetings. A summary of such meetings can be found on the FASB's Website. Notably, the FASB has moved away from its previous position that an entity needs a "majority" of the risks and rewards to consolidate, changing instead to "significant" risks and rewards. The FASB also decided to remove the scope exception for entities consolidated by other entities. The IASB Board and Staff initially concurred with these decisions.

The Board noted that the tension points in this project are in the leasing literature and in the derecognition model in proposed amendments to IAS 32/39. However, the leasing model cannot be fixed as part of this project. The Board also discussed whether risk is measurable in order to make the significance test or majority test workable. The Board eventually concluded that risk is measurable; however, such measurements could be impractical and may be applied inconsistently.

The Board noted that there are the following 4 models that could be developed independently:

• Who has the risks,
• Who has the rewards (or combination of these two),
• Continuing involvement, and
• Components approach.

Several Board members raised the question of whether a guarantee of the risks of an SPE by an insurance company or other unrelated entity would force de-consolidation by the parties to the SPE or consolidation by the guarantor. No conclusions were reached; however, several members expressed views that would not require consolidation on these terms.

Board members also noted that the model developed for recognition of an SPE is inconsistent with the model for normal asset recognition. That is, a company would record the assets and liabilities of an SPE when it has the risks of ownership, but would record an asset when it has probable future benefit. The Board acknowledged that this inconsistency would remain under any of the proposed models.

The Board noted that SIC 12 currently uses, in combination, several of the models noted above. However, SIC 12 uses the term majority. The Board stated that the intent of SIC 12 was not on who has the majority, but on the notion of probable future losses and the sensitivity to losses. The Board decided to request that the IFRIC clarify the use of majority in a limited project on the application of SIC 12. This IFRIC interpretation should be completed in the near term (timing may be potentially consistent with the FASB's issuance of their SPE project).