Conceptual Framework — the reporting entity

Date recorded:

The IASB and FASB discussed whether to revise its project timeline for completion of the reporting entity phase of the conceptual framework project. The Boards further discussed two issues that were originally discussed at the October joint meeting, specifically:


Entity versus proprietary perspective

The staff provided the Boards with a summary of their discussions at previous joint meetings, and outlined the prominent views expressed by respondents in commenting on the Preliminary Views of the reporting entity phase of the framework project. The staff noted that several respondents believed the Boards had not adequately discussed or debated the issue of presenting financial statements from a given perspective (i.e. entity, proprietary, and parent company approach). The staff recommended that the Boards should not discuss the perspective from which financial statements are presented in the reporting entity chapter of the conceptual framework.

Some Board members expressed their agreement with the staff's recommendation, noting their belief that the issue had already been adequately addressed. A FASB member suggested the Boards briefly include further discussion within the basis for conclusions section of the framework. An IASB member indicated he thought the topic was out of the scope of reporting entity chapter. However, other Board members expressed concerns with making a decision to do no further work or research on the issue. As multiple Board members expressed concern, the staff indicated that it could conduct additional analysis to clarify what is meant by presenting financial statements under either an entity or a proprietary perspective so that the Boards could determine if, and where, further clarification should be included in the framework project. The Boards agreed with the staff's suggestion and voted to reject the staff's initial recommendation.

Requirement for combined financial statements

The Board held a similar discussion over the concerns that they had not adequately discussed and clarified when it would be appropriate to prepare combined financial statements. The staff noted that many respondents disagreed with the initial proposal that combined financial statements should be restricted to the combination of entities under common control, citing that common control could be one reason to create combined financial statements, but is not necessarily the only reason. The staff also noted that a decision to not retain this proposal would result in the need to spend significant time to develop concepts related to combined financial statements.

The Boards voted against the staff's recommendation to restrict the use of combined financial statements to entities under common control. Similar to the issue of entity versus proprietary views for preparing financial statements, several Board members indicated their belief that not enough analysis had been performed on the issue. One IASB member indicated that the conceptual framework should not be specifically restrictive. In turn, a FASB member stated that if combined financial statements were permitted, the entities being combined would have to be under common control; however, specific circumstances are still unclear. Other Board members also stated that the issue centered on the concept of control, and the concept needed further analysis and expansion.

Revised project timeline

As the Boards determined that both of the significant issues required further analysis, the staff discussed potential revised timelines for the reporting entity chapter of the conceptual framework. The staff indicated that given the Boards' calendars, the most likely timeline would be to bring the issues back to the Boards in July 2011.

In addition, although not on the meeting's agenda, the staff indicated that the measurement chapter of the framework project may also be in a situation similar to the reporting entity chapter, and therefore asked the Boards its views on the timeline. After discussing the current and upcoming agenda, the Boards and staff agreed that the staff would continue to work on the measurement project in the near-term, and could likely bring any issues before the Boards in December or January.

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