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Consolidation

Date recorded:

High-level discussion of comments received on ED 10

The staff noted that 148 comment letters had been received in response to ED 10, and that there was a significant level of support for the concept of consolidation based on control. However, there was also a significant level of disagreement about how the IASB had articulated the control concept.

A Board member noted that many of the comment letters he had read demonstrated that constituents were schizophrenic about whether control meant that an entity was in control of another now and whether that control could be perpetuated. He thought that the ED had been as clear as possible on that issue, but it was obvious that constituents did not believe the Board mean what it said. Other Board members echoed these comments.

The main item of discussion in this part of the debate was the concern expressed by several constituents that the Board should coordinate its work on consolidation and derecognition so that the two standards are consistent. Board members were sympathetic to this idea, but noted that it was possible that something might be removed from the balance sheet under the proposed derecognition standard only to be consolidated.

Project plan

The Board discussed how best to proceed with the project. The staff presented three alternatives to completing the project: (i) proceed as planned and issue a final IFRS by the end of 2009 if possible; (ii) align the publication date of the consolidation IFRS with that for derecognition; and (iii) split the consolidation project in two and issue a standard enhancing disclosures as soon as possible and then work on the control model, publishing that portion by 2011.

Board members discussed the alternatives, but ultimately concluded that now was not the time to make such decisions. The Board directed the staff to continue work on the project as it is. Any decision to split the project would be taken in September or October, that is, after the initial analysis of comments on the derecognition project was available to the Board.

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