Consolidations including Special Purpose Entities

Date recorded:

The Board discussed the general approach the staff is intending to take on this project and, in particular, how it intends to monitor and interact with the concurrent project to revisit the IASB's Framework.

Timing and interaction with the Framework project

The Board agreed that the Framework was the appropriate location of the general concepts (e.g., that financial statements should present the financial position, etc, of the parent and all entity that it controls) and that the standards on consolidation should house the detail of how that concept is made operational. The Board agreed that it would be ideal if the application dates for the proposed replacement for IFRS 3 and the amendments to IAS 27 under the current phase of the Business Combinations project were aligned with the proposed replacement of IAS 27 under the consolidations project.

The Board also agreed that the consolidation project should not delay the completion of the project to replace IFRS 3, which is currently scheduled for completion in 2Q 2007. The staff currently intends to proceed directly to an exposure draft, on the basis that the overall approach to consolidation will not change (it will still be control), rather the Board will be providing greater specificity around how the control model is applied. While giving their tentative approval to this approach, Board members warned the staff that constituents might not see the proposals in the same manner.

Special purpose entities

The Board was notified that Ed Trott, an FASB member, will present an educational session on the development and problems of FIN 46(R) during the April Board meeting. Several Board members noted that the session should help to convince the Board that the FASB model is not an optimal answer.

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