Consolidation

In June 2003, the IASB added a project on consolidation to its agenda.

The objective of the project is to publish a single IFRS on consolidation to replace IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities. The project addresses the following aspects:

1. a revision of the control definition in order to apply the same control criteria to all legal entities. The work on the revised control definition will focus on, but is not limited to, the consolidation of structured entities.
2. enhanced disclosures to enable users of the financial statements to evaluate:

• the judgments used when reaching decisions to consolidate or not;
• the nature and financial effect of restrictions on assets and liabilities resulting from legal entity boundaries that exist within the reporting group; and
• the nature of, and risks associated with, the involvement with entities that are not controlled.

Next due process step

The next milestone in this project is to publish an exposure draft on consolidation in the second half of 2008.

Due process steps completed

Stage 1: Setting the agenda

The project was added to the agenda in June 2003.

Stage 2: Project Planning

Throughout the deliberation process the Board has published its tentative decisions to ensure that constituents are kept informed of the direction that the project is taking and any preferences the Board has expressed on the matters discussed.

Stage 3: Development and publication of a discussion paper

Although a discussion paper is not a mandatory step in the IASB Due Process Handbook, the Board decided that a discussion paper would provide an effective forum to communicate their preliminary views and engage in a discussion with respondents. The Board expects to issue a discussion paper in the second half of 2008.

Estimated project completion

The current project plan envisages the publication of an exposure draft in the second half of 2008 and the issue of a revised standard in the second half of 2009.

Related Projects

The consolidation project has interactions with other projects including Derecognition, Fair Value Measurement Guidance, Common Control Transactions, Joint Ventures and Conceptual Framework, Phase D: Reporting Entity.

The consolidation project might generate useful inputs for the related projects and the conclusions reached in other projects might affect the Board’s work in relation to consolidation.

Further information:

• Open a full project report [PDF], including a summary of the tentative decisions the Board has reached.