Below is an excerpt from our letter. Our past comment letters to the IASB/IASC are
Here.
We conceptually agree with the proposed definition for a reporting entity and support the proposal to keep the definition broad. However, we believe that the broadness of the definition should be supplemented by more discussion on why it is important to define the concept of what constitutes a reporting entity. Similarly, while we concur that control should be defined at the conceptual level and that the controlling model should be used to define entities to be included within consolidated financial statements, we suggest that the Board expands its discussion on the matter and clarifies certain aspects. One of the key aspects of the controlling model that needs to be clarified at the conceptual level is whether consolidation is appropriate when an entity (the investor) controls at the present time another entity (the investee) or whether it is appropriate when the investor has the ability to obtain control, at present, over the investee. The ambiguity is evidenced by the fact that, on the one hand, the DP defines control has 'having the ability to determine...' while on the other hand it indicates in paragraph 154 that 'the ability to take control' does not translate in having control at the present time.
Finally, we agree that there is a need to allow the preparation of general purpose 'group' financial statements in certain circumstances not captured by the controlling entity model. However, we believe that the common control model fails to capture all of these circumstances and we find that the restriction on the preparation of combined financial statements contradictory to the principle of allowing for a broad definition of a reporting entity.
Click to view Comment Letter on the IASB's Discussion Paper on the Reporting Entity (PDF 196k).