Comments on pre-ballot draft

The Board members and five external reviewers received in July a pre-ballot draft on the reporting entity discussion paper with request for comments.

At this meeting, comments received and proposed amendments where discussed with the Board members in order to determine whether the Board is satisfied with the changes made and would allow the staff to proceed with preparing a ballot draft of the discussion paper.

General issues in the context of an individual reporting entity

The comments received on this section raised a lack of clarity about the objectives this section was trying to achieve as well as the difficulty to understand its link with the section dealing with group reporting entity. The revised section clarifies why:

• the Board considered whether to develop a definition of a reporting entity
• the legal existence is sufficient to establish that a reporting entity exists
• a component of a legal entity, such as a branch, can be a reporting entity.

In addition, the revised section is more clearly linked with the objective of financial reporting. The description of a reporting entity has also been slightly modified to become 'a circumscribed area of business activity of interest to present and potential investors and creditors'.

One Board member stressed that it would be relevant to link what we mean by 'business' to the available definition in IFRS. Another member question whether subsidiary individual financial statements can be considered as general purpose financial statements as the completeness assertion cannot be met. Please refer to further discussion in the below section. In the end, the Board agreed with this revised section provided that minor amendments are made.

Other comments received

In the section on parent-only and consolidated financial statements, the pre-ballot draft states that 'the majority of the FASB members concluded that, in concept, parent-only financial statements should not be a required part of a parent entity's general purpose external financial report'. This statement raised significant debate among the Board on whether parent-only financial statements were required in all cases, in certain circumstances or if addition information would be sufficient. At some point, the Board considered to vote on whether parent only financial statements where required as part of general purpose consolidated financial statements of a parent. However, the Board could not figure out the exact question to vote on and therefore decided to postpone the vote to the next Board meeting.

Finally, the Board agreed to leave it up to the Project Manager to decide what would be the most efficient: to prepare the pre-ballot draft based on all comments received without submitting it one last time to the Board or whether the paper should go one more time to the Board. Some Board members express some concerns due to the number of comments to be incorporated.