Conceptual Framework Phase D — Reporting Entity

Date recorded:

The Board gave direction to the staff preparing the exposure draft of the Reporting Entity chapter of the Framework as follows. There was very little debate of these issues. The Board agreed:

  • That concerns raised with regard to the Objectives chapter should not be discussed in the Reporting Entity chapter
  • That it should proceed with the conceptual framework project without regard to whether there are conflicts with current standards-level projects
  • That something less than a legal entity could be a reporting entity
  • That a portion a group of entities could be a reporting entity
  • To replace 'party' with 'entity', 'parent' with 'controlling entity', and 'subsidiary' with 'controlled entity' throughout the revised Framework
  • Not to use the same wording as in ED10 for the definition of 'control of an entity'
  • To explain that control of an entity includes a notion of risks and rewards but that risks and rewards by itself is not a workable criterion for identifying a group entity
  • To add an explanation that joint control is an issue related to accounting for certain types of investments and not an issue of defining the reporting entity
  • To clarify in the Basis for Conclusions an example that is intended to demonstrate that the concept of an area of economic activity need not be affected by the way in which entities are structured
  • That the Framework should not discuss whether there are cases where parent-only financial statements could provide information that is more useful than consolidated financial statements
  • That the Basis for Conclusions should discuss the role and usefulness of separate financial statements
  • That combined financial statements might qualify as general purpose financial statements
  • That there was no need to provide more explanation of the difference between combined and consolidated financial statements
  • That an appendix illustrating the application of the reporting entity concept to various situations should be provided
  • That, for the time being at least, the Reporting Entity chapter should retain references to and a brief discussion of proportionate consolidation
  • That the phrase 'in this chapter' be replaced with 'in this conceptual framework'

The Board did not support a suggestion that a universal change be made to IFRSs to replace 'separate financial statements' with 'parent-only financial statements'.

The Board directed that the exposure draft should be issued when it is ready and should not wait upon any other IASB standards-level projects.

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