IASB December 2006

The Board continued its discussion of the reporting entity phase of the Conceptual Framework project. The issues discussed and decisions reached are summarised below. Further details on these issues are contained in the observer notes.

Parent/group entity views

This issue concerns the relationship between the parent entity and the group entity, including:

• whether the parent entity and the group entity are one and the same entity, or two different entities, and
• the implications for the general purpose external financial reports of the parent entity.

At their respective meetings in September, the IASB and FASB reached different preliminary views on the various parent/group entity views discussed. At this meeting, the Board discussed the issue again and several members indicated that as a result of the further clarifications, their earlier views on the issues might have changed. The Board asked the staff to develop material for the discussion paper that more clearly articulates the relevant issues, various viewpoints on those issues, and the rationale for supporting particular viewpoints. Once this work is completed, both the IASB and FASB will discuss the issue again, to determine whether the discussion paper is clear and whether the two boards have a common preliminary view.

Parent company approach to the preparation of consolidated financial statements

The issue concerns the relationship between the parent company approach to the preparation of consolidated financial statements and the issues discussed to date in the reporting entity phase. The Board noted that the parent company approach raised issues that are related to several phases of the Conceptual Framework project and also to the Consolidations project. The Board tentatively decided that the Conceptual Framework project should include a discussion of the parent company approach and asked the staff to consider how best to accomplish that discussion. Alternatives include a separate discussion paper on the topic, a separate part of a discussion paper for the reporting entity phase, or as part of the redeliberations on the objectives of financial reporting (Phase A) and its next due process document.

Consistency with the Consolidations project

This issue concerns the consistency of decisions reached in the reporting entity phase of the Conceptual Framework project and the Consolidations project. The staff noted that, in many respects, consistent decisions had been reached in both projects. Any differences relate to the parent/group entity views discussed above. The Board decided to defer its discussion on the consistency of decisions reached in the two projects until it makes further progress on the parent/group entity views in the Conceptual Framework project.