The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have just released for public comment their Conceptual Framework for Financial Reporting: The Reporting Entity. In particular, the Boards are soliciting input to four questions:
- Is a reporting entity a “circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders, and other creditors…?” If not, why?
- If an entity that controls one or more entities prepares financial reports, should it present consolidated financial statements? Do you agree with the definition of entity control? If not, why?
- Should a portion of an entity qualify as a reporting entity if its economic activities can be distinguished from the rest of the entity and its financial information is potentially useful to others (investors, lenders, etc.) about whether to provide it resources? If not, why?
- The FASB and the IASB are developing common consolidation standards that would apply to all types of entities. Should they delay the completion of the reporting entity concept until they have issued those standards? If not, why?
Comments to either Board are due by July 16, 2010, as per the instructions in the Exposure Draft; the FASB and IASB will consider all submissions jointly.
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